Question

Stryker Industries received an offer from an exporter for 30,000 units of product at $19 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available: Domestic unit sales price $23 Unit manufacturing costs: Variable 12 Fixed 6 What is the amount of income or loss from acceptance of the offer? a.$360,000 b.$210,000 c.$570,000 d.$690,000

Answer 1

b.$210,000

Sales price per unit		$ 19.00
Variable cost per unit		$ 12.00
Contribution Margin per unit		$ 7.00
Total Units sold		30,000
Total Contribution Margin		$ 2,10,000
Fixed Cost		$ 0
Net Income		$ 2,10,000.00
Working:
Offer price is $ 19 per unit.So, Sales price per unit taken as $ 19 per unit.
Variabe cost per unit of making this product is $ 12 per unit .
Fixed cost does not affect this offer.So, this is not relevant for decision making.