Question

Question 1

Maize Company incurs a cost of $34.18 per unit, of which $19.42 is variable, to make a product that normally sells for $58.68. A foreign wholesaler offers to buy 5,200 units at $31.11 each. Maize will incur additional costs of $1.09 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Reject		Accept		Net Income Increase (Decrease)
Revenues		$		$		$
Costs		$
Net income		$		$		$

Should Maize Company accept the special order?

Maize company should

AcceptReject

the special order.

Answer 1

(a)		Reject order	Accept order	Net Income Increase (Decrease)
	Revenues (5200 X $31.11)	0	$         1,61,772	$        1,61,772
	Costs [5200 X ($19.42 + $1.09)]	0	$       -1,06,652	$       -1,06,652
	Net Income	0	$            55,120	$            55,120
(b)	Maize company should Accept the special order

If it is helpful, please rate the answer and if any doubt arises let me know