Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1 per bear. Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order.

Question

Business

Darren Gallegos

15 November, 23:15

Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1 per bear. Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order.

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Kaley Rivera · Answer 1

Pederson enterprise would realize $8,000 incremental income by accepting the special Oder.

Explanation:

Pederson Enterprise

Incremental revenue (8,000 * $14)

$112,000

Incremental variable costs ($12 * 8,000). (96,000)

Incremental shipping costs

($1*8,000) (8,000)

Incremental profit if special order accepted. $8,000

Pederson enterprise would realize $8,000 incremental income by accepting the special Oder as shown in the table above.