Homework answers / question archive / PowerDrive, Inc

PowerDrive, Inc

Finance

Share With

PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was:   Direct material$625,000Direct labor375,000Variable overhead125,000Fixed overhead1,500,000Total cost$2,625,000At the start of the current year, the company received an order for 3,400 drives from a computer company in China. Management of PowerDrive has mixed feelings about the order. On the one hand they welcome the order because they currently have excess capacity. Also, this is the company's first international order. On the other hand, the company in China is willing to pay only $135 per unit. What will be the effect on profit of accepting the order?

Round to two decimal places.