At Bestco Electronics, it costs $28 per unit ($15 variable and $13 fixed) to make an EarBuds. The Earbuds normally sell for $40, but a local wholesaler wishes to buy 3,000 units at $20 each. Bestco Electronics will incur special packaging costs of $1 per Earbud unit.
a.Assuming that Bestco Electronics has sufficient operating capacity to accept this special order, indicate the operating income (loss) Bestco Electronics would realize by accepting the special order. Show computations.
b.Now assume that Bestco Electronics has does not have sufficient operating capacity to accept this special, but that it would need to lease additional equipment for $9,500 for the special order, indicate the operating income (loss) Bestco Electronics would realize by accepting the special order. Show computations.

Question

Quizplus · Accepted Answer

The Answer of At Bestco Electronics, it costs $28 per unit ($15 variable and $13 fixed) to make an EarBuds. The Earbuds normally sell for $40, but a local wholesaler wishes to buy 3,000 units at $20 each. Bestco Electronics will incur special packaging costs of $1 per Earbud unit.
a.Assuming that Bestco Electronics has sufficient operating capacity to accept this special order, indicate the operating income (loss) Bestco Electronics would realize by accepting the special order. Show computations.
b.Now assume that Bestco Electronics has does not have sufficient operating capacity to accept this special, but that it would need to lease additional equipment for $9,500 for the special order, indicate the operating income (loss) Bestco Electronics would realize by accepting the special order. Show computations.

At Bestco Electronics, It Costs $28 Per Unit ($15 Variable