13-21 Special Order Decision Relay Corporation manufactures batons. Relay can ma

Question

13-21 Special Order Decision Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a at a variable cost of $750,000 and a fixed cost of $450,000. Based on Relay's preditione 240,000 batons will be sold at the regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 40% discount off the regular price. Required y what amount would income before income taxes be increased or decreased as a result of the special order? (AICPA adapted)

Explanation / Answer

Calculate effect on income before tax :

Income before tax increase by $30000

Sale from special order (5*60%)*60000 180000 Less : Variable cost (2.5*60000) (150000) Income before tax 30000

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.