Question

At Bargain Electronics, it costs $33 per unit ($18 variable and $15 fixed) to make an MP3 player at full capacity that normally sells for $42. A foreign wholesaler offers to buy 4,260 units at $29 each. Bargain Electronics will incur special shipping costs of $1 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.
Reject OrderAccept OrderNet Income Increase(Decrease)

Revenues$$

Costs-Manufacturing

shipping

Net income$


The special order should be
Reject or expect

Answer 1

Answer:

The special order should be accepted.

Explanation:

Giving the following information:

At Bargain Electronics, it costs $33 per unit ($18 variable and $15 fixed). A foreign wholesaler offers to buy 4,260 units at $29 each. Bargain Electronics will incur special shipping costs of $1 per unit.

Because it is a special offer and there is unused capacity we will not have into account the fixed costs.

Sales= 29*4260= 123,540

Variable costs= 80,940 (-)

Contribution margin= 42,600

The special order should be accepted.