Whispering Winds Manufacturing has an annual capacity of 81,000 units per year. Currently, the company is making and selling 78,200 units a year. The normal sales price is $102 per unit, variable costs are $65 per unit, and total fixed expenses are $2,000,000. An out-of-state distributor has offered to buy 5,400 units at $70 per unit. Whispering Winds's cost structure should not change as a result of this special order. By how much will Whispering Winds's income change if the company accepts this order?

Net loss from accepting the order  $(56,200 )

Explanation:

Note that Whispering Winds Manufacturing currently has excess capacity

Excess capacity = 81,000 - 78,200 = 2800  units

The relevant cash flows associated with this special order are as follows:

Note that the special order would be met as follows

2800 from the excess capacity

2600 from existing sales

5400

                                                                                       $

Total contribution from special order:

(70-65) × 5400                                                              27000

Contribution lost from selling 2,600

at a reduced price:

(102-70)  × 2,600                                                        (83,200)

Net loss from accepting the order                             (56,200 )

its simple as this, microeconomics is the study of economics at an individual, group or company level, macroeconomics on the other hand, is the study of a national economy as a whole.

hope it =^-^=