The Parton Company Has Gathered the Following Information for a Unit

Essay

The Parton Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r } \text { Direct materials } & \$ 20 \\\text { Direct labor } & 15 \\\text { Overhead (60\% variable) } & 20 \\\text { Cost to manufacture } & \$ \mathbf { 5 5 } \\\end{array}$$
The above cost information is based on 10,000 units. Parton currently sells 8,500 units for $62 per unit. A distributor has offered to buy 1,000 units at a price of $50 per unit. This special order would not disturb regular sales.
Required:
a. Calculate Parton's change in operating profits if the special order is accepted.
b. How many units of regular sales could be lost before this contract is not profitable?