Question

At Bargain Electronics, it costs $30 per unit ($20 variable and $10 fixed) to make an MP3 player that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Bargain Electronic will incur special shipping costs of $3 per unity. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronic would realize by accepting the special order.

Reject Order Accept Order Net Income Increase (Decrease)
Revenues
Costs-Manufacturing
Shipping
Net income

The special order should be :__________

Answer 1

The special order should be : Accepted

Step-by-step explanation:

Analysis of whether or not to accept special order

Revenues (3,000 x $25) $75,000

Less Variable expenses :

Costs - Manufacturing (3,000 x $20) ($60,000)

Shipping (3,000 x $3) ($9,000)

Net Income $6,000

Conclusion :

Since Net Income has increased by $6,000 as a result of special order, it should be accepted