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Question 5 Maize Company incurs a cost of $34.74 per unit, of which $19.38 is variable, to make a product that normally sellsMaize Company incurs a cost of $34.74 per unit, of which $19.38 is variable, to make a product that normally sells for $58.78. A foreign wholesaler offers to buy 5,800 units at $31.10 each. Maize will incur additional costs of $3.09 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity.

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Answer #1
Reject Accept Net income Increase (Decrease)
Revenues 0 5800*31.10 = $180380 $180380
Costs 0 (19.38+3.09)*5800 = $130326 (130326)
Net income 0 $50054 $50054

Maize company should accept the special order.

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