It costs Mackey Company $22 of variable and $15 of fixed costs to produce one Pa

Question

It costs Mackey Company $22 of variable and $15 of fixed costs to produce one Panini press which normally sells for $57. A foreign wholesaler offers to purchase 1,000 Panini presses at $35 each. Mackey would incur special shipping costs of $5 per press if the order were accepted. Mackey has sufficient unused capacity to produce the 1,000 Panini presses. If the special order is accepted, what will be the effect on net income?

A. $8,000 increase

B. $8,000 decrease

C. $22,000 decrease

D. $7,000 increase

Explanation / Answer

If Special Order is accepted the there will be an increase of $ 8000.

Effect on Net Income Incremental Sales 35*1000 35000 Incremental Cost (22+5)*1000 27000 Net Income 8000

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