Question

It costs a company $14 of variable costs and $6 of fixed costs to produce product Z200 that sells for $30. A foreign buyer offers to purchase 3,000 units at $18 each. The seller will incur special shipping costs of $5 per unit. If the special offer is accepted and produced with unused capacity, and none of the fixed costs are affected, then net income will:

Answer 1

Answer:

the net income would be decreased by $3,000

Explanation:

The computation of the net income is shown below;

Total cost is

= $14 + $5

= $19 per unit

And, the Selling price is $18 per unit

Now

Income = Revenue - Cost

= $18 - $19

= -1 per unit

And, finally

Total Income = 3000 units × (-1)

= -$3000

Hence, the net income would be decreased by $3,000