Question

At Bargain Electronics, it costs $29 per unit ($20 variable and $9 fixed) to make an MP3 player at full capacity that normally sells for $44. A foreign wholesaler offers to buy 3,020 units at $24 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		$		$		$
Costs-Manufacturing
Shipping
Net income		$		$		$

The special order should be

rejectedaccepted

.

Answer 1

Calculation for net income if special order has been accepted

Sales revenue [ 3,020 X $ 24 ]	72,480
Cost of manufacturing [ 3,020 X 20]	60,400
Shipping Costs [ 3,020 X $ 2 ]	6,040
Total Cost of special order	66,440
Net Income from special order [ Sales revenue - Total cost of special order ]	6,040

So, Special order to be accepted as it increase the net income of the company.

As per your given format :

	Reject Order	Accept Order	Net Income Increas (Decrease)
Revenues	0	72,480	72,480
Cost of manufacturing	0	60,400	(60,400)
Shipping	0	6,040	(6,040)
Net Income	0	6,040	6,040

So, special order to be accepted, because it can increase net income of the company by $ 6,040.

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