In Harley Company it costs $29 per unit ($19 variable and $10 fixed) to make a p

Question

In Harley Company it costs $29 per unit ($19 variable and $10 fixed) to make a product that normally sells for $46. A foreign wholesaler offers to buy 3,510 units at $26 each. Harley will incur special shipping costs of $1 per unit. Assuming that Harley has excess operating capacity.

Indicate the net income (loss) Harley would realize by accepting the special order. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)

Reject
Order
Accept
Order Net Income
Increase
(Decrease) Revenues $ $ $ Costs—Manufacturing            Shipping Net income/(loss) $ $ $

Explanation / Answer

The Special Order should be accepted.

The Net Income increases by $ 21,060

Reject the Order Accept the Order Net Income Increase/(Decrease) Revenue 0 $ 91,260 Cost- Manufacturing @ 19 per unit $ 66,690 Shipping Cost @ 1 per unit $ 3,510 Total Cost $ 70,200 Net Income Increase $ 21,060

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