2. Geis Company produces 40,000 printers per month, which is 80% of plant capaci

Question

2. Geis Company produces 40,000 printers per month, which is 80% of plant capacity. Variable manufacturing costs are $80 per unit and fixed manufacturing costs are $30 per unit, or $1,200,000. The printers are normally sold directly to retailers at $150 each. Geis has an offer from a foreign wholesaler to purchase an additional 4,000 printers at $100 per unit. Acceptance of the offer would not affect normal sales of the product and the additional units can be manufactured without increasing plant capacity. What is the amount of increase (decrease) to net income if Geis accepts the offer? a. ($200,000) b. ($40,000) c. $40,000 d. $80,000

Explanation / Answer

Answer:d. $80000

=(100 - 80 )X 4000 = $80000

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