Answer:
Effect on income= $10,000 increase
Explanation:
Giving the following information:
Variable manufacturing costs $1,030,000
Variable selling and administrative costs $120,000
The company has received a special order for 1,000 units at $60.00 per unit.
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs.
First, we need to calculate the unitary variable cost:
Unitary variable manufacturing cost= 1,030,000/23,000= $44.78
Unitary variable selling and administrative cost= 120,000/23,000= $5.22
Total unitary variable cost= 44.78 + 5.22= $50
Now, we can determine the effect on income:
Effect on income= 1,000*(60 - 50)= $10,000 increase
