Lta company produces a single product. the cost of producing and selling a single unit of this product at the company's normal activity level of 60,000 units per year is: direct materials $ 5.10 direct labor $ 3.80 variable manufacturing overhead $ 1.00 fixed manufacturing overhead $ 4.20 variable selling and administrative expense $ 1.50 fixed selling and administrative expense $ 2.40 the normal selling price is $21 per unit. the company's capacity is 75,000 units per year. an order has been received from a mail-order house for 15,000 units at a special price of $14.00 per unit. this order would not affect regular sales. required: 1. if the order is accepted, by how much will annual profits be increased or decreased? (the order will not change the company's total fixed costs.)

The company's profits will increase by $39,000.

Revenues per unit from the new order is $14.

The company has a total variable cost of $11.4 per unit.

The new order quantity is 15,000.

This results in a contribution margin of $2.6 per unit ( $14 - $11.4).

Since the order will not increase the company's fixed costs, the company's profits will increase to the extent of ($2.6 × 15,000).

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.