Falcon Co. produces a single product. Its normal selling price is $25 per unit. The variable costs are $16 per unit. Fixed costs are $20,200 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,620 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, what would be the impact on net income? a.increase of $7,776 b.increase of $9,720 c.decrease of $5,832 d.increase of $12,636
Falcon Co. produces a single product. Its normal selling price is $25 per unit. The variable costs are $16 per unit. Fixed costs are $20,200 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,620 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, what would be the impact on net income? a.increase of $7,776 b.increase of $9,720 c.decrease of $5,832 d.increase of $12,636
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Falcon Co. produces a single product. Its normal selling price is $25 per unit. The variable costs are $16 per unit. Fixed costs are $20,200 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,620 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated.
If the order is accepted, what would be the impact on net income?
a.increase of $7,776
b.increase of $9,720
c.decrease of $5,832
d.increase of $12,636
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