JNR Products produces and sells plastic soft drink cups with specialised logos on the front. They...
JNR Products produces and sells plastic soft drink cups with specialised logos on the front. They sell the cups in batches of 500 for $125 per batch. The company has the capacity to produce 100 batches per month but averages much less. When 75 batches are sold a month, each batch has $40 worth of variable costs and $5 worth of xed overhead costs allocated to it. The company has been approached by a local reman's association who wishes to purchase three batches of cups for $50 per batch. If the special order were accepted, net income would:
a. increase by $10.
b. decrease by $225.
c. increase by $15.
d. increase by $30.
Homework Answers
Answer: D) Increase by $30
Special Order = 3 Batches
Variable Cost Per Batch = $40
Selling Price PEr batch in Special order = $50
Net income Per Batch = $50-$40 = $10
Increase in NEt income = $10*3 Batches = $30
Note: Fixed Manufacturing Overhead is not Consider for Special Order, As it is within Capacity.
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