Assume Road Runner Shoes has a plant capacity that can produce 3,000 units per week (each unit is a pair of shoes). Its predicted operations for the week follow:
Sales (2,000 units at $40 each) ………………………………………………………. $80,000
Manufacturing Costs
Variable………………………………………………………………………………….. $15 per Unit
Fixed…………………………………………………………………………………………….. $10,000
Marketing and Administrative Costs
Variable (all sales commissions) …………………………………………………… $3 per Unit
Fixed………………………………………………………………………………………………… $1,500
Should Road Runner accept a special order for 400 units at a selling price of $30 each?
Assume these units are subject to half the usual sales commission rate per unit, and assume no effect on regular sales at regular prices. How will the decision affect the company’s operating profit?