Minnesota Company has the following data about its only product: Assume there is excess capacity.The company has received a special order for 1,000 units at $80.00 per unit.If the special order is accepted,what will be the effect on net income?
A)net income increases $1,000
B)net income increases $30,000
C)net income decreases $80,000
D)net income decreases $200,000

Question

Minnesota Company has the following data about its only product:   Assume there is excess capacity.The company has received a special order for 1,000 units at $80.00 per unit.If the special order is accepted,what will be the effect on net income?
A)net income increases $1,000 
B)net income increases $30,000 
C)net income decreases $80,000 
D)net income decreases $200,000

Quizplus · Accepted Answer

Since there is excess capacity, accepting the special order will not affect regular sales. The additional revenue from the special order will be $80,000 (1,000 x $80), and the additional cost will be $60,000 (1,000 x $60). Therefore, the net income will increase by $20,000 ($80,000 - $60,000).

Minnesota Company Has the Following Data About Its Only Product