Question

Practice

Answer 1

If the special order for 3,000 boxes of crystal glassware is accepted, the effect on the net income of Harvest, Inc. is an increase of $12,000.

What is break-even analysis?

Break-even analysis is an accounting technique to ensure that a company does not incur losses from its transactions.

Using the technique, a corporation ensures that the total costs are at least equal to the total revenue or the contribution margin is sufficient to cover the fixed costs, which are not variable within a relevant range.

The technique is based on the concepts of contribution margin and variable costing.

Data and Calculations:

Special order units = 3,000 boxes

Price per box for special order = $30

Variable costs per box = $24

Special shipping costs per box for the special order = $2

Contribution margin per box = $4 ($30 - $24 - $2)

Total Contribution Margin = $12,000 ($4 x 3,000)

Fixed costs = $30,000 ($10 x 3,000)

Normall selling price per box = $70

Thus, if the special order for 3,000 boxes of crystal glassware is accepted, the effect on the net income of Harvest, Inc. is an increase of $12,000.

Learn more about accepting special orders at brainly.com/question/25307534