Luse Enterprises is considering a special order for an export company. Luse’s no

Question

Luse Enterprises is considering a special order for an export company. Luse’s normal selling price is $15 per unit, and the price for the special order is $10 per unit for 10,000 units. Luse’s variable cost is normally $8 per unit but $1 per unit in selling expense that is normally incurred will be avoided on the special order. Luse has capacity to produce 100,000 units and is currently selling 90,000. Total fixed costs of $30,000 per year will be unaffected. What will be the impact of the accepting the special order on Luse’s income?

Explanation / Answer

Incremental revenue 100000 =10000*10 Incremental costs 70000 =10000*(8-1) Incremental income 30000 Income will increase by $30,000

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