Corn Company incurs a cost of $34.73 per unit, of which $20.92 is variable, to m

Question

Corn Company incurs a cost of $34.73 per unit, of which $20.92 is variable, to make a product that normally sells for $58.61. A foreign wholesaler offers to buy 5,500 units at $31.33 each. Corn will incur additional costs of $1.96 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Corn will realize by accepting the special order, assuming Corn has sufficient excess operating capacity. (If answer is zero, please enter 0. Do not leave any fields blank. If amount decreases the income, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Enter all amounts in columns "Reject" and "Accept" as positive amounts and subtract where necessary.)

Reject

Accept

Increase (Decrease)

$

$

$

Should Corn Company accept the special order?

Net Income

Reject

Accept

Increase (Decrease)

Revenues $ $ $ Costs

Net Income

$

$

$

Explanation / Answer

revenue = 5500 * 31.33 = 172315$ costs = (34.73 + 1.96 ) * 5500 = 201795$ net income(decrease) = -29480$ although net income decreases it should accept the order as it have to incur fixed costs anyways and so this is profitable

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