In Tarine Company it costs $30 per unit ($20 variable and $10 fixed) to make a p

Question

In Tarine Company it costs $30 per unit ($20 variable and $10 fixed) to make a product that normally sells for $45. A foreign wholesaler offers to buy 4,000 units at $21 each. Tarine will incur special shipping costs of $0.50 per unit. Assuming that Tarine has excess operating capacity and will still have normal sales, prepare an incremental analysis that indicates the net income (loss) Tarine would realize by accepting the special order.

a. If Tarine rejects the order, what's the net income?

b. If Tarine accepts the order, what's the net income?

Explanation / Answer

a Net income = $0 b Revenue 84000 =4000*21 Variable costs 82000 =4000*20.5 Net income 2000

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