Special Order: Effect on Income Suckert Company manufactures lacrosse sticks. Th

Question

Special Order: Effect on Income Suckert Company manufactures lacrosse sticks. The company's capacity is 6,000 sticks per month; however, it currently sells only 3,200 sticks per month. Long Meadow Sports has offered to buy 800 lacrosse sticks for $30 each from Suckert. Normally, the company sells its sticks for $45. Suckert's accounting records report the cost of each stick to be $20, including fixed costs of $10 each. Required: If Suckert were to accept Long Meadow's offer, what would be the impact on Suckert's income?

Explanation / Answer

Impact on Income Before offer After Offer Profit before the offer Units 3200 4000 price 45 45 30 Sales 3200*45 144000 144000+800*30 168000 Variable cost 3200*20 -64000 -80000 Fixed Cost 3200*10 -32000 -32000 Income 48000 56000 Increase in income 56000-48000 8000

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