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DECISION MAKING
Special Orders - Example
Total Approach:
Current Profit:
Sales (R165 x 25 500) R4 207 500
Variable costs (R68 x 25 500) (R1 734 000)
Fixed costs (R304 000)
Monthly Profit R2 169 500
Profit if special order is accepted:
Sales (R165 x 24 000) + (R100 x 6 000) R4 560 000
Variable costs (R68 x 30 000) (R2 040 000)
Fixed costs (R304 000)
Monthly Profit R2 216 000
Increase in profit if special order is accepted: R2 216 000 – R2 169 500 = R46 500
Therefore accept the special order.
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