Answer:
Effect on income= $38,640 increase
Explanation:
Giving the following information:
Units= 2,400
Seling price= $36
Variable cost per unit:
Direct materials $4.80
Direct labor 4.00
Variable manufacturing overhead 1.90
Total variable cost= 10.7
Increase in variable cost= $1.70
Increase in fixed costs= $18,000
<u>Because it is a special offer, there is unused capacity, and other sales will not be affected, we will take into account only the incremental fixed costs (besides the variable costs).</u>
Sales= (2,400*36)= 86,400
Total variable cost= 2,400*(10.7 + 1.7)= (29,760)
Increase fixed costs= (18,000)
Effect on income= $38,640 increase
