Question

At Bargain Electronics, it costs $29 per unit ($16 variable and $13 fixed) to make an MP3 player that normally sells for $50. A foreign wholesaler offers to buy 3,480 units at $27 each. Bargain Electronics will incur special shipping costs of $1 per unit. Assuming that Bargain Electronics has excess operating capacity.

Required:
Indicate the net income (loss) Bargain Electronics would realize by accepting the special order.

Answer 1

$34,800.

Step-by-step explanation:

Reject Accept

Revenues $0 (3480*27) = $93,960 $93,960

Costs $0 (3480*16) = -$55,680 -$55,680

Shipping $0 (3480*1) = -3480 -$3,480

Net income $0 34,800 $34,800

So, the net income that Bargain Electronics would realize by accepting the special order is $34,800.