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At Bargain Electronics, it costs $31 per unit ($20 variable and $11 fixed) to make an MP3 player that normally sells for $49. A foreign wholesaler offers to buy 4,170 units at $25 each. Bargain Electronics will incur special shipping costs of $1 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues		$enter revenues in dollars		$enter revenues in dollars		$enter revenues in dollars
Costs—Variable manufacturing		enter variable manufacturing costs in dollars		enter variable manufacturing costs in dollars		enter variable manufacturing costs in dollars
Shipping		enter shipping costs in dollars		enter shipping costs in dollars		enter shipping costs in dollars
Net income		$enter net income in dollars		$enter net income in dollars		$enter net income in dollars

The special order should be select an option rejectedaccepted .

Answer 1

Answer

	Reject order	Accept order	Net Income Increase (Decease)
Revenues	$               -	$     104,250	$                                       104,250
Costs—Variable manufacturing	$               -	$     (83,400)	$                                       (83,400)
Shipping	$               -	$        (4,170)	$                                         (4,170)
Net income	$               -	$       16,680	$                                         16,680

The special order should be ACCEPTED.

Calculation of values:

	Accept order
Revenues	= 4170 * $ 25
Costs—Variable manufacturing	= -4170 * $ 20
Shipping	= -4170 * $ 1

In case of any doubt, please comment.