The Bharu Violin Corporation has the capacity to manufacture and sell 5,000 violins each year but is currently only manufacturin

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Nadusha1986

1 month ago

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The Bharu Violin Corporation has the capacity to manufacture and sell 5,000 violins each year but is currently only manufacturin

g and selling 4,800. The following data relate to annual operations at 4,800 units: Per Violin Selling price $ 600 Manufacturing costs: Variable $ 130 Fixed $ 270 Selling and administrative costs: Variable $ 20 Fixed $ 40 Woolgar Symphony Orchestra is interested in purchasing Bharu's excess capacity of 200 units but only if they can get the violins for $350 each. This special order would not affect regular sales or the total fixed costs. Assume that Bharu is manufacturing and selling at capacity (5,000 units). Any special order will mean a loss of regular sales. Under these conditions if the special order from Woolgar Symphony Orchestra is accepted, the financial advantage (disadvantage) Bharu for the year should be:

Business

1 answer:

Katen [3.5K] · Answer 1 · 2026-04-03T05:16:11+03:00

The financial advantage amounts to $40,000. To determine the relevant variable cost, we can calculate it as follows: Unit variable cost = 130 + 20 = 150. The revenue from the special order (200 × $350) equals 70,000. The variable cost (200 × 150) is 30,000. Thus, the financial advantage totals 40,000. It's important to note that fixed manufacturing and selling costs have been excluded from this analysis since they remain constant regardless of the acceptance of the special order.