Gwinnett barbecue sauce corporation manufactures a specialty barbecue sauce. gwinnett has the capacity to manufacture and sell 10,000 cases of sauce each year but is currently only manufacturing and selling 9,000. the following costs relate to annual operations at 9,000 cases:
total cost variable manufacturing $126,000
fixed manufacturing $45,000
variable selling and administrative $18,000
fixed selling and administrative $27,000
gwinnett normally sells its sauce for $30 per case. a local school district is interested in purchasing gwinnett’s excess capacity of 1,000 cases of sauce but only if they can get the sauce for $15 per case. this special order would not affect regular sales or total fixed costs or variable costs per unit.
if this special order is accepted, gwinnett’s profits for the year will: a. decrease by $4,000 b. decrease by $1,000 c. increase by $600 d. decrease by $6,600
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