Answer:
Since relevant revenue (115,92) is greater than relevant cost (60,260) the order should be accepted. By accepting the order the company will earn extra $60,375.92
Explanation:
Calculation of contribution to profit from special order:
Sales revenue =$2,520*46 slabs = 115,92
Cost of raw materials =$810*46 slabs = (37,260)
Cost of direct labor =$500*46 slabs =(23,000)
Total relevant cost = (37,260) + (23,000)
= (60,260)
contribution to profit = 115,92 - (60,260) = 60,375.92
Since relevant revenue (115,92) is greater than relevant cost (60,260) the order should be accepted. By accepting the order the company will earn extra $60,375.92
