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Vesna [10]
2 years ago
11

Falcon Co. produces a single product. Its normal selling price is $26 per unit. The variable costs are $16 per unit. Fixed costs

are $18,900 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,470 units with a special price of $21 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, what would be the impact on net income
Business
1 answer:
xxTIMURxx [149]2 years ago
6 0

Answer:

Effect on income= $10,290 increase

Explanation:

Giving the following information:

Falcon can handle the special order, and for this order, a variable selling cost of <u>$2 per unit would be eliminated.</u>

<u>Because it is a special order that would not affect current sales, we won't take into consideration the fixed costs.</u>

<u></u>

<u>To calculate the effect on income, we need to use the following formula:</u>

Effect on income= Number of units sold*unitary contribution margin

Effect on income= 1,470*(21 - 14)

Effect on income= $10,290 increase

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