It costs Waterway Industries $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3600 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Waterway has sufficient unused capacity to produce the 3600 scales. If the special order is accepted, what will be the effect on net income

Question

Amina Whitehead

Business

24 July, 11:43

It costs Waterway Industries $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3600 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Waterway has sufficient unused capacity to produce the 3600 scales. If the special order is accepted, what will be the effect on net income

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Answers (1)

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Seth Giles · Answer 1

Effect on income = $7,200 increase

Explanation:

Giving the following information:

It costs Waterway Industries $12 of variable

A foreign wholesaler offers to purchase 3600 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted.

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

Effect on income = 3,600 * (15 - 13) = $7,200 increase