Q1)- The European company for sports produced in one of its production lines
basketball. The Director of Planning presented the income statement for the year
2000 as follows:
Details
The total amount
Per unit
Sales
$4000000
$10
Cost Industrial to Sales
3200000
8
gross profit
800,000
2
Cost of Marketing & administration 300000
0.75
Net Operating Profit
500000
1.25
Fixed cost represents the amount of$ 1200000 as industrial costs, and $100000 as
marketing and administrative costs. At the same time, a customer submits an order
for the processing of (50,000) ball at $ 7.5, there is no additional marketing costs
upon acceptance of this order and the company has sufficient production capacity
To meet this order and that this order did not affect its competitive position.
Required: Do you recommend acceptance of this order explaining the amount of
increase or decrease in the profits of the company.