Question

It costs Marigold Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 6200 units at $21 each. Marigold would incur special shipping costs of $2 per unit if the order were accepted. Marigold has sufficient unused capacity to produce the 6200 units. If the special order is accepted, what will be the effect on net income? $18600 increase

Answer 1

Answer:

$6,200 Increase

Explanation:

Given that,

Costs Marigold Company = $26 per unit

Fixed cost = $8

Variable cost = $18

Selling price = $38 per unit

Foreign wholesaler offers to purchase 6200 units at $21 each.

Shipping costs = $2 per unit

Effect on net income:

= Sales - Variable cost - special shipping cost

= (6,200 × $21) - (6,200 × $18) - (6,200 × $2)

= $130,200 - $111,600 - $12,400

= $6,200 Increase