Question

Stryker Industries received an offer from an exporter for 27,000 units of product at $19 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $24 Unit manufacturing costs: Variable 9 Fixed 5 The amount of profit or loss from acceptance of the offer is a a.$513,000 b.$270,000 c.$648,000 d.$243,000

Answer 1

Answer:

b.$270,000

Explanation:

Consider the incremental Costs and Revenues arising from Acceptance of the Offer.

Note : Fixed Costs are irrelevant for this decision as order is accepted within normal production capacity of Stryker Industries

Sales (27,000×$19)                                                  513,000

Less Variable Manufacturing Cost (27,000×$9)  (243,000)

Net Income                                                               270,000

Therefore acceptance of offer would result in incremental income of $ 270,000