Question

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.10 per unit. Bluebird currently produces and sells 75,000 units at $7.10 each. This level represents 80% of its capacity. Production costs for these units are $3.65 per unit, which includes $2.30 variable cost and $1.35 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

Answer 1

effect on net income Δ12,000

It will increase by 12,000

Step-by-step explanation:

special order 15,000 at $3.10

sales 3.10 - variable cost 2.3 = 0.8 contribution margin per unit

15,000 x 0.8 = 12,000 contribution

There are no increase on fixed cost or additional variable cost for shipping or setup for this special order.