Question

e Company incurs cost of $35.70 per unit, of which?19.94 is variable, to make a product that normally sells for $58.16. A foreign wholesaler offers to buy 6,400 units at $31.76 each. Maize will incur additional costs of $1.0 unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Net Income Increase (Decrease) Reject Accept Revenues Costs Net income $ Should Maize Company accept the special order? Maize company should the special order.

Answer 1

Answer:

The order results in an incremental net income of $69,278 therefore accept

Explanation:

Consider the Incremental Costs and Revenues arising from this decision.

Since Maize has sufficient excess operating capacity, fixed costs are irrelevant for this decision.

Sales (6,400 units ×$31.76)                                            203,264

Variable Costs (6,400 units ×$19.94)                             (127,616)

Logo and Shipping Costs  (6,400 units ×$1.00)              (6,400)

Net Income                                                                        69,248

The order results in an incremental net income of $69,278 therefore accept