Assume Melville can sell 58,000 units of Pong to regular customers next year.If Mowen Corporation offers to buy the 6,000 special order units at $65 per unit, the annual financial advantage (disadvantage) for Melville as a result of accepting this special order should be:

A) $36,000
B) $11,000
C) $192,000
D) $47,000

To calculate the financial advantage or disadvantage, we need to calculate the incremental revenue and incremental costs associated with this special order.

Incremental revenue = Number of special order units x Price per unit
= 6,000 x $65 = $390,000

Incremental cost = Variable cost per unit x Number of special order units
= $32 x 6,000 = $192,000

Therefore, the incremental profit = Incremental revenue - Incremental cost
= $390,000 - $192,000
= $198,000

Since the question asks for the annual financial advantage, we need to divide the incremental profit by the number of units sold in a year (regular customers + special order units) and multiply by 12 to get the annual financial advantage:
Annual financial advantage = (Incremental profit / (58,000 + 6,000)) x 12
= ($198,000 / 64,000) x 12
= $36,750

Since the incremental profit is positive and the annual financial advantage is greater than zero, accepting the special order from Mowen Corporation would be beneficial for Melville.

The closest answer choice to our calculated annual financial advantage is B) $11,000, which is not correct. Therefore, there is no perfect answer choice, but the best option is to choose the closest one, which is B.

The company would have to cut back its sales to regular customers by 4,000 units to accommodate the special order. Reference: CH11-Ref18
Younes Inc.manufactures industrial components.One of its products, which is used in the construction of industrial air conditioners, is known as P06.Data concerning this product are given below: The above per unit data are based on annual production of 4,000 units of the component.Assume that direct labor is a variable cost.