Company produces fresh juice. Each bottle of juice consists of $12 of variable costs and $9...
Company produces fresh juice. Each bottle of juice consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 bottels at $14 each of which company has the capacity to produce will incur extra shipping costs of $1 per bottle.
Required:
Based on quantitative aspects only, determine whether company should accept or reject the order? show your calculation.
Homework Answers
Evaluation of order
| Sales (8,000 x 14) | 112,000 |
| Variable cost (8,000 x 12) | -96,000 |
| Shipping cost (8,000 x 1) | -8,000 |
| Profit | $8,000 |
Fixed cost will not be affected due to special order. Special order should be accepted since it will provide an extra income of $8,000.
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