Question

It costs Sheffield Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 7800 units at $21 each. Sheffield would incur special shipping costs of $2 per unit if the order were accepted. Sheffield has sufficient unused capacity to produce the 7800 units. If the special order is accepted, what will be the effect on net income?

Answer 1

Answer:

$7,800 Increase

Explanation:

Calculation to determine what will be the effect on net income If the special order is accepted,

Effect on net income= ((7,800 x $21) - [($18 + $2) x 7,800]

Effect on net income=$163,800-($20*7,800)

Effect on net income=$163,800-$156,000

Effect on net income= $7,800 Increase

Therefore If the special order is accepted, what will be the effect on net income is $7,800 Increase