Question

At Bargain Electronics, it costs $29 per unit ($17 variable and $12 fixed) to make an MP3 player that normally sells for $53. A foreign wholesaler offers to buy 4,510 units at $28 each. Bargain Electronics will incur special shipping costs of $4 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Answer and Explanation:

The computation is shown below;

Particulars Reject Order Accept Order Net Income

Revenues $0 $126,280 $126,280

(4,510 units × $28)

Variable manufacturing $0 $76,670 -$76,670

(4,510 units × $17)

Shipping $0 $18,040 -$18,040

(4,510 units × $4)

Net Income $0 $31,570 $31,570

Hence, the net income is in positive value so the special order would be accepted