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live oak products has an annual plant capacity to produce 50 000 units its predicted 690934

Live Oak Products has an annual plant capacity to produce 50,000 units. Its predicted operations for the year follow:

Sales revenue (40,000 units at $20 each)

$800,000

Manufacturing costs

 

Variable

$8 per unit

Fixed

$200,000

Selling and administrative costs

 

Variable (commissions on sales)

$2 per unit

Fixed

$40,000

Should the company accept a special order for 4,000 units at a selling price of $15 each, which is subject to half the usual sales commission rate per unit? Assume no effect on fixed costs or regular sales at regular prices. What is the effectof the decision on the company’s operating profit t?

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