Question

At Bargain Electronics, it costs $32 per unit ($19 variable and $13 fixed) to make an MP3 player at full capacity that normally sells for $46. A foreign wholesaler offers to buy 3,180 units at $26 each. Bargain Electronics will incur special shipping costs of $4 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.
Reject Accept Net Income
Order Order Increase (Decrease)
Revenues
Costs-Manufacturing
Shipping
Net income

Answer 1

Answer and Explanation:

The computation is shown below:

Particulares             Reject    accept      increase  

                                order order (decrease)

Revenues                    0       $82,680   $82,680  

                                     (3,180 × $26)

Cost- manufacturing  0        -$60,420  -$60420

                                            (3,180 × $26)

shipping                      0         -$12,720   -$12,720  

                                           (3,180 × $4)

net income                 0          $9,540      $9,540  

Therefore the special order is accepted