18. Seville Company manufactures a product with a unit variable cost of $42 and

Question

18. Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75.
Fixed manufacturing costs were $80,000 when 10,000 units were produced and sold, equating to $8
per unit. The company has a one-time opportunity to sell an additional 2,000 units at $55 each in an
international market which would not affect its present sales. The company has sufficient capacity to
produce the additional units. How much is the relevant income effect of accepting the special order?

19. Billings Company has the following costs when producing 100,000 units:
Variable costs $400,000
Fixed costs 600,000
An outside supplier has offered to make the item at $3 a unit. If the decision is made to purchase the
item outside, current production facilities could be leased to another company for $110,000. The net
increase (decrease) in the net income of accepting the supplier

Explanation / Answer

18: 0 $55-$42=$13 x 2,000 = $26,000

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