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Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 20,000 cases of sauce each year but is currently only manufacturing and selling 18,000. The following costs relate to annual operations at 18,000 cases:

Total Cost
Variable manufacturing cost $288,000
Fixed manufacturing cost $64,000
Variable selling and administrative cost $54,000
Fixed selling and administrative cost $46,000

Gwinnett normally sells its sauce for $35 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 2,000 cases of sauce but only if they can get the sauce for $18 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:

increase by $1,800

decrease by $2,000

decrease by $18,000

decrease by $12,000

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Casey Durgan
Casey DurganLv2
29 Sep 2019

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