Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Bluebird currently produces and sells 75,000 units at $7.20 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler's name and would not affect Bluebird's sales through its normal channels. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

Question

Business

Ayaan

2 November, 06:58

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Bluebird currently produces and sells 75,000 units at $7.20 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler's name and would not affect Bluebird's sales through its normal channels. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

+4

Answers (1)

Know the Answer?

Valentin · Answer 1

Effect on income = $12,750 increase

Explanation:

Giving the following information:

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost.

Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:

Effect on income = 15,000 * (3.2 - 2.35) = $12,750 increase