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A company currently sells 8,380 basketballs (units) per year for $25 each. The company can make up to 10,380 basketballs per year. Each basketball made includes $15 in variable costs and $6.50 of fixed costs. A new customer offers to buy 695 basketballs for $20 each. For this special offer, the incremental fixed costs are $3.80 per ball. No other costs will change if the offer is accepted. a) For this special offer, calculate the income. b) Should the special offer be accepted or rejected? (a) Special offer analysis Contribution margin Income (b) The company should S Per Unit 0.00 Total

A company currently sells 8,380 basketballs (units) per year for $25 each. The company can make up to 10,380 basketballs per year. Each basketball made includes $15 in variable costs and $6.50 of fixed costs. A new customer offers to buy 695 basketballs for $20 each. For this special offer, the incremental fixed costs are $3.80 per ball. No other costs will change if the offer is accepted. a) For this special offer, calculate the income. b) Should the special offer be accepted or rejected? (a) Special offer analysis Contribution margin Income (b) The company should S Per Unit 0.00 Total

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company currently sells 8,380 basketballs (units) per year for $25 each. The company can make up to 10,380 basketballs per year. Each basketball made includes $15 in variable costs and $6.50 of fixed costs. A new customer offers to buy 695 basketballs for $20 each. For this special offer, the incremental fixed costs are $3.80 per ball. No other costs will change if the offer is accepted. a) For this special offer, calculate the income. b) Should the special offer be accepted or rejected? (a) Special offer analysis Contribution margin Income (b) The company should S Per Unit 0.00 Total
Transcribed Image Text:A company currently sells 8,380 basketballs (units) per year for $25 each. The company can make up to 10,380 basketballs per year. Each basketball made includes $15 in variable costs and $6.50 of fixed costs. A new customer offers to buy 695 basketballs for $20 each. For this special offer, the incremental fixed costs are $3.80 per ball. No other costs will change if the offer is accepted. a) For this special offer, calculate the income. b) Should the special offer be accepted or rejected? (a) Special offer analysis Contribution margin Income (b) The company should S Per Unit 0.00 Total
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