Answer:
The special order should be accepted, as it will increase Net income by $38,000.
Explanation:
Differential Analysis
Reject Accept Net income Increase/(Decrease)
Revenues 0 $118,750 $118,750
Cost-manufacturing 0 $76,000 -$76,000
Shipping 0 $4,750 <u>-$4,750</u>
Net income 0 $38,000 <u>$38,000</u>
The special order should be accepted, as it will increase Net income by $38,000.
<u>Workings</u>
Accept Order Revenue = 4,750 *$25 = $118,750
Accept Order Cost-manufacturing = 4,750 * $16 = $76,000
Accept Order Shipping = 4,750 * $1 = $4,750
