Question

It costs Sunland Company $28 of variable costs and $18.0 of allocated fixed costs to produce an industrial trash can that sells for $90. A buyer in Mexico offers to purchase 3000 units at $30 each. Sunland Company has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?

Answer 1

Increase in income= $6,000

Step-by-step explanation:

Giving the following information:

It costs Sunland Company $28 of variable costs and $18.0 of allocated fixed costs to produce an industrial trash can that sells for $90. A buyer in Mexico offers to purchase 3000 units at $30 each. Sunland Company has excess capacity and can handle the additional production.

Because it is a special offer and there is unused capacity, we will not have into account the fixed costs.

Effect on income= (30 - 28)*3,000= $6,000