It costs Waterway Industries $12 of variable and $5 of fixed costs to produce one bathroom...
It costs Waterway Industries $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3600 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Waterway has sufficient unused capacity to produce the 3600 scales. If the special order is accepted, what will be the effect on net income?
| $54000 increase |
| $7200 decrease |
| $10800 decrease |
| $7200 increase |
Homework Answers
Revenue from special order
= (15 - 1)* 3600
= 50,400
Cost for the special order
= 12*3600
= 43,200
So, if order is accepted, net income increases by (50,400-43,200)
= 7,200 increase
Option D
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gross profit of $240000.
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