Maize Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign

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2 years ago

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Maize Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign

wholesaler offers to buy 6,000 units at $30 each. Maize will incur additional costs of $4 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. Should Maize Company accept the special order?

Business

1 answer:

lbvjy [14] · Answer 1 · 2023-05-19T16:17:35+03:00

Answer: $36,000

Explanation: In case company has to accept the offer, the order selected must result in addition to value to the company , that is, the order must make profit to the firm. We can calculate profit as follows :-

Profit = Revenue - cost

= (6,000 units * $30) - (6000 units * $20) - (6,000 units * $4 )

= $36,000

Hence, company should accept the offer.