Asked by Bimala Sharma Acharya on Apr 24, 2024
It costs Maker Company $22 of variable and $15 of fixed costs to produce one Panini press which normally sells for $57. A foreign wholesaler offers to purchase 1000 Panini presses at $40 each. Maker would incur special shipping costs of $5 per press if the order were accepted. Maker has sufficient unused capacity to produce the 1000 Panini presses. If the special order is accepted what will be the effect on net income?
A) $13000 decrease
B) $13000 increase
C) $22000 decrease
D) $7000 increase
Variable Costs
Costs that vary directly with the level of production or business activity, such as raw materials and labor.
Fixed Costs
Expenses that remain constant in total regardless of changes in the level of business activity or output.
Net Income
The total amount of profits earned by a company after all expenses and taxes have been deducted from revenue.
- Acquire knowledge on the variables that influence cost trends and their pertinence in step-by-step analysis.
- Comprehend the principles guiding decisions for special orders, particularly regarding capacity considerations and extra costs.
Learning Objectives
- Acquire knowledge on the variables that influence cost trends and their pertinence in step-by-step analysis.
- Comprehend the principles guiding decisions for special orders, particularly regarding capacity considerations and extra costs.