Question

Stryker Industries received an offer from an exporter for 28,000 units of product at $17 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:

Domestic unit sales price	$22
Unit manufacturing costs:
Variable	12
Fixed	5

What is the amount of income or loss from the acceptance of the offer?

a.$476,000 income

b.$336,000 loss

c.$616,000 loss

d.$140,000 income

Jacoby Company received an offer from an exporter for 28,200 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:

Domestic unit sales price	$24
Unit manufacturing costs:
Variable	$9
Fixed	$3

What is the differential revenue from the acceptance of the offer?

a.$676,800

b.$225,600

c.$1,128,000

d.$451,200

Answer 1

Question - 1.

Answer : D = $ 140,000.

>> Net Income ( Loss ) = ( $ 17 - $ 12 ) * 28,000 = $ 140,000..

>> Fixed cost is not incurred for special order, so we consider variable cost.

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Question - 2

Answer : D = $ 451,200 .

>> Differential revenue if offer accepted = 28,200 * $ 16 = $ 451,200.

>> There is no effect for normal production and domestic sales, so we should not consider opertunity cost