Data for one of the Shepard Company products is as follows: Maximum capacity 127830 Current sales...

Data for one of the Shepard Company products is as follows:

Maximum capacity	127830
Current sales level	51033
Selling price	$51.14
Variable production costs	26.09
Variable selling costs	7.98
Fixed costs	405932

Shepard has been offered a one-time special order for 44000 units at a price of $39.63. If the special order is accepted, 56% of the variable selling costs will be incurred for each unit of the special order. What is the incremental income to the Shepard Company on the special order?

Select one:

a. $-351947

b. $399133

c. $244640

d. $866108

Expert Solution

All working forms part of the answer
Incremental Income = Incremental revenues – Incremental Cost

A	Incremental Revenue	$ 1,743,720	[44000 units x $ 39.63]
	*Incremental Cost:*
	Variable production cost	$ 1,147,960	[44000 units x $ 26.09]
	Variable selling Costs	$ 196,627	[44000 units x $ 7.98 x 56%]
B	Total incremental cost	$ 1,344,587
C = A - B	Incremental Income	$ 399,133

Correct Answer = Option ‘B’ $ 399,133

ekkarill92 answered 2 years ago

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