Exercise 8-5 Bramble Manufacturing has an annual capacity of 80,900 units per ye

Question

Exercise 8-5

Bramble Manufacturing has an annual capacity of 80,900 units per year. Currently, the company is making and selling 78,100 units a year. The normal sales price is $102 per unit, variable costs are $70 per unit, and total fixed expenses are $2,000,000. An out-of-state distributor has offered to buy 5,700 units at $75 per unit. Bramble's cost structure should not change as a result of this special order.

By how much will Bramble's income change if the company accepts this order?

Explanation / Answer

Relavent cost per unit = Variable cost per unit = 70 per unit

Order Selling price = 75 per unit

Income from the Special order = (75 - 70) * 5,700 = 28,500

Bramble’ net income will increase by 28,500 if it accepts the special order.

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