Question

At Bargain Electronics, it costs $30 per unit ($20 variable and $10 fixed) to make an MP3 player at full capacity that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Bargain Electronics will incur special shipping costs of $3 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.

Answer 1

Bargain Electronics

Bargain Electronics would realize a net income of $6,000 by accepting the special order.

Step-by-step explanation:

a) data and Calculations:

Production costs of MP3 Player:

Variable cost = $20

Fixed cost = $10

Total costs = $30

Selling price = $45

Special order from a foreign wholesaler = 3,000 units

Special order selling price = $25 per unit

Additional special shipping costs per unit = $3

Variable production costs = $20

Total costs for the special order = $23 ($3 + $20)

Net income from special order = $6,000 ($2 * 3,000)