Question

Cold company makes large containers of ice cream at a variable cost of $10 per container. it usually sells the container for $15. cold company is operating at less than full capacity. a potential new customer is requesting containers of ice cream at a selling price of $12. should cold company accept the special order? select the best answer to the question. yes, there will be a $12 increase in net income for every new container sold. no, there will be a $3 decrease in net income for every new container sold. no, there will be a $5 decrease in net income for every new container sold. yes, there will be a $2 increase in net income for every new container sold.

Answer 1

yes, there will be a $2 increase in net income for every new container sold.

Step-by-step explanation:

Since the cold company has a variable cost of $10, so at this price the company is covering it's variable costs. Any amount over and above this price charged would be surplus and profit for the company. If the company accepts the special order it would make a profit of $2 for every new container sold. The company was previously selling the container for $15 but they were selling limited number of containers. Therefore by accepting this special order they would probably generate more net income with a $2 profit (many containers) than with a $5 profit (limited containers).