Question

Blue technologies manufactures and sells dvd players. great products company has offered blue technologiesâ $22 per dvd player forâ 10,000 dvd players. blueâ technologies' normal selling price isâ $30 per dvd player. the total manufacturing cost per dvd player isâ $18 and consists of variable costs ofâ $14 per dvd player and fixed overhead costs ofâ $4 per dvd player.â (note: assume excess capacity and no effect on regularâ sales.) how much are the expected increaseâ (decrease) in revenues and expenses from the special salesâ order?

Answer 1

The expected increase in revenues is $2,20,000 .

The expected increase in costs is $1,40,000.

The Selling price per unit for the new 10,000 units order is $22. So, increase in revenues is to the extent of (10,000 × $22).

The question assumes excess capacity, hence fixed expenses will remain the same. The increase in Variable costs to the extent of (10,000 × $14) will contribute to an increase in costs.