Question

Maize Company incurs a cost of $34 per unit, of which $21 is variable, to make a product that normally sells for $59. A foreign wholesaler offers to buy 6,100 units at $30 each. Maize will incur additional costs of $2 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity

Answer 1

A.$42,700 increase

B. Yes

Step-by-step explanation:

A.

Selling price unit $30

Variable cost unit ( 21)

Logo ( 2)

Contribution margin unit $ 7 x 6,100 units = $42,700 increase

Therefore the increase in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity is $42,700

(b) Should Maize Company accept the special order?

YES. Maize company should accept the special order.