Do It! Review 7-2 Haze Company incurs a cost of $34.49 per unit, of which. 19.37

Question

Do It! Review 7-2 Haze Company incurs a cost of $34.49 per unit, of which. 19.37 is variable, to make a product that nor na ly sels for $58.37. A foreign wholesaler offers to buy 6,300 units at $30.85 each. Mate will incur additional costs of $1.74 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Reject Accept Revenues Costs Net income Should Maize Company accept the special order? Maize company should the special order

Explanation / Answer

Reject

Accept

Net Income Increase/decrease

Revenues

$ 0

$194355

$194355

Costs

$ 0

$132993

$132993

Net Income

$   0

$61362

$61362

Yes, the company should accept this offer as it will be a profitable deal for the company.

Notes:

Rejected Colum is zero because if they reject the offer they have no incremental revenue, cost and net income.

Reject

Accept

Net Income Increase/decrease

Revenues

$ 0

$194355

$194355

Costs

$ 0

$132993

$132993

Net Income

$   0

$61362

$61362

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