The following information relates to the Parker Company for the upcoming year.
Amount Per unit
Sales $9000000 $30
Cost of goods sold 7200000 24
gross margin 1800000 6
operating expenses 675000 2.25
operating profit 1125000 3.75
The cost of goods sold includes $3000000 of fixed manufacturing overhead; the operating expenses include $450000 of fixed
marketing expenses. A special order offering to buy 50000 units for $25.00 per unit has been made to Parker. Fortunately there will be no additional
operating expenses associated with the order and Parker has sufficient capacity to handle the order.
a. How much will operating profits increase if Parker accepts the special order?
b. Assume that Parker is operating at full capacity. How much will operating profits
change if Parker accepts the special order?