At Bargain Electronics, it costs $33 per unit ($18 variable and $15 fixed) to make an MP3 player at full capacity that normally sells for $42. A foreign wholesaler offers to buy 4,260 units at $29 each. Bargain Electronics will incur special shipping costs of $1 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.

Reject OrderAccept OrderNet Income Increase (Decrease)

Revenues$$

Costs-Manufacturing

shipping

Net income$

The special order should be

Reject or expect

Question

Imani Ashley

Business

22 June, 13:46

At Bargain Electronics, it costs $33 per unit ($18 variable and $15 fixed) to make an MP3 player at full capacity that normally sells for $42. A foreign wholesaler offers to buy 4,260 units at $29 each. Bargain Electronics will incur special shipping costs of $1 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.

Reject OrderAccept OrderNet Income Increase (Decrease)

Revenues$$

Costs-Manufacturing

shipping

Net income$

The special order should be

Reject or expect

+3

Answers (1)

Know the Answer?

Giovani Grimes · Answer 1

The special order should be accepted.

Explanation:

Giving the following information:

At Bargain Electronics, it costs $33 per unit ($18 variable and $15 fixed). A foreign wholesaler offers to buy 4,260 units at $29 each. Bargain Electronics will incur special shipping costs of $1 per unit.

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

Sales = 29*4260 = 123,540

Variable costs = 80,940 (-)

Contribution margin = 42,600

The special order should be accepted.