Question

Marigold Corp. manufactures a product with a unit variable cost of $100 and a unit sales price of $181. Fixed manufacturing costs were $480000 when 10000 units were produced and sold. The company has a one-time opportunity to sell an additional 1000 units at $120 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Answer 1

Answer:

Increase in income= $20,000

Explanation:

Giving the following information:

Marigold Corp. manufactures a product with a unit variable cost of $100 and a unit sales price of $181. Fixed manufacturing costs were $480000 when 10000 units were produced and sold. The company has a one-time opportunity to sell an additional 1000 units at $120 each in a foreign market which would not affect its present sales.

We will not have into account the fixed costs, because there is unused capacity.

Increase in income= contribution margin * units sold

Increase in income= (120 - 100) * 1000= $20,000