Question

Dawson Company manufactures a chair that has a current market price of $220. Company stockholders expect a 25% return (ROI) and the company's average assets of $650,000. The company expects to sell 2,000 chairs. Variable costs per chair is $80 and fixed costs total $10,000. Turner Company made a special offer for 400 units but at a sales price of $100. There is plenty of capacity and there would be no additional fixed costs.

This special order would increase the company's net income by:

Answer 1

Price of Special order chair=100

Variable cost per chair= $80

Fixed cost= no additional because of plenty capacity= Profit per chair= $20

400*20= $8000

The special order would increase the company's net income by $8,000

Step-by-step explanation: