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AB Inc. currently produces a product with the following cost characteristics: Selling price $92 Variable costs...

AB Inc. currently produces a product with the following cost characteristics:

Selling price

$92

Variable costs – production

34

Variable costs – S&A

20

Total fixed costs

$994680

Plant capacity

41322

Current product/sales volume

36840

A customer approaches AB Inc. for a special one-time order to purchase 10851 units at a special price of $76 per unit. No variable selling and administrative costs would be incurred on this special order.

What would be the incremental income to AB Inc. if it were to accept this special order?

Select one:

a. $-3300

b. $455742

c. $213720

d. $582654

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Answer #1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer Part 1) The correct answer is c) $ 213720 Firstly we have to calculate the contribution margin loss on the unit sales

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