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14 June, 23:17

A product normally sells for $200 per unit. A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products. What is incremental net income per unit from accepting this special order?

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  1. 14 June, 23:24
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    Effect on income = $2 increase per unit

    Explanation:

    Giving the following information:

    A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products.

    We need to calculate the effect on income using the following formula:

    Effect on income = sales - unitary variable costs

    Effect on income = 180 - (160 + 180*0.1) = $2 increase per unit
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