Potlatch Company manufactures sonars for fishing boats. Model 100 sells for $200. Potlatch produces and sells 5,000 of them per year. Cost data are as follows: Variable manufacturing$105.00 Per unitVariable marketing$5.00 Per unitFixed manufacturing$270,000 Per yearFixed marketing & admin$140,000 Per year The sales manager says he has an opportunity to pitch a special sale to a new Canadian fishing company that is outfitting new boats. He proposes a sale of 30 units at a special price of $140 per unit. He says it will not affect the company's regular sales and is a one-time transaction. It will require the normal amount of variable costs, both marketing and manufacturing, but will not impact fixed costs in any way. If the Canadian fishing company accepts the offer, what will the effect be on Potlatch’s net income? **Show your work to support
Potlatch Company manufactures sonars for fishing boats. Model 100 sells for $200. Potlatch produces and sells 5,000 of them per year. Cost data are as follows:
Variable manufacturing$105.00 Per unitVariable
marketing$5.00 Per unitFixed
manufacturing$270,000 Per yearFixed
marketing & admin$140,000 Per year
The sales manager says he has an opportunity to pitch a special sale to a new Canadian fishing company that is outfitting new boats. He proposes a sale of 30 units at a special price of $140 per unit. He says it will not affect the company's regular sales and is a one-time transaction. It will require the normal amount of variable costs, both marketing and manufacturing, but will not impact fixed costs in any way. If the Canadian fishing company accepts the offer, what will the effect be on Potlatch’s net income? **Show your work to support your answer
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
