Question

Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1 per bear. Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order.

Answer 1

Pederson enterprise would realize $8,000 incremental income by accepting the special Oder.

Step-by-step explanation:

Pederson Enterprise

Incremental revenue (8,000 ×$14)

$112,000

Incremental variable costs ($12 ×8,000). (96,000)

Incremental shipping costs

($1×8,000) (8,000)

Incremental profit if special order accepted. $8,000

Pederson enterprise would realize $8,000 incremental income by accepting the special Oder as shown in the table above.