Exercise D8-5 Marston Manufacturing has an annual capacity of 85,000 units per y

Question

Exercise D8-5 Marston Manufacturing has an annual capacity of 85,000 units per year. Currently, the company is making and selling 78,000 units a year. The normal sales price is $120 per unit, variable costs are $90 per unit, and total fixed expenses are $2,000,000. An out-of-state distributor has offered to buy 12,000 units at $105 per unit. Marston's cost structure should not change as a result of this special order. By how much will Marston's income change if the company accepts this order? Marston' net income will by $ if it accepts the special order. Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

As fixed cost is same and sales is above breakeven point

Sales - variable cost = contributions will be the income for the marston manufacturing company

12000* (105-90) = 12000 * 15 = 180000

Will be the increase in income

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