Question

At Bargain Electronics, it costs $34 per unit ($17 variable and $17 fixed) to make an MP3 player that normally sells for $54. A foreign wholesaler offers to buy 4,950 units at $29 each. Bargain Electronics will incur special shipping costs of $2 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).) Reject Order Accept Order Net Income Increase (Decrease) Revenues $enter revenues in dollars $enter revenues in dollars $enter revenues in dollars Costs—Variable manufacturing enter variable manufacturing costs in dollars enter variable manufacturing costs in dollars enter variable manufacturing costs in dollars Shipping enter shipping costs in dollars enter shipping costs in dollars enter shipping costs in dollars Net income $enter net income in dollars $enter net income in dollars $enter net income in dollars.

Answer 1

Net income will be -$34650

Bargain electronics should reject the order.

Step-by-step explanation:

Total revenue to be generated = $29 x 4950 = $143550

Total fixed manufacturing cost = $34 x 4950 = $168300

Total variable (shipping) cost = $2 x 4950 = $9900

Total manufacturing cost = $168300 + $9900 = $178200

Net income = total income to be generated - total manufacturing cost

Net income = $143550 - $178200

= -$34650

Bargain electronics should reject the order.