At Blossom Electronics, it costs $33 per unit ($15 variable and $18 fixed) to make an MP3 player that normally sells for $54. A foreignwholesaler offers to buy 4,520 units at $26 each. Blossom Electronics will incur special shipping costs of $1 per unit. Assuming thatBlossom Electronics has excess operating capacity, indicate the net income (loss) Blossom Electronics would realize by accepting thespecial order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses eg. (45).)RevenuesCosts-Variable manufacturingShippingNet incomeThe special order should beRejectOrder$$AcceptOrderNet IncomeIncrease (Decrease)$$$$

Fixed cost always remains constant. Hence it can be said that fixed costs are not relevant to…

Answered: At Blossom Electronics, it costs $33…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 5P

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At Bargain Electronics, it costs $30 per unit ($20 variable and $10 fixed) to make an MP3 player that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Bargain Electronics will incur special shipping costs of $3 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.
The company has been approached by an overseas distributor who wants to purchase 9,500 units on a special price basis. There would be no sales commission on these units. However shipping cost would be increased by 50% and variable administrative cost would be reduced by 25%. In addition a 55,700 special insurance fee would have to be paid by Whitney Company to protect the goods in transit. What unit price would have to be qouted on the 9,500 units by whitney company to allow the company to earn a profit of $14,250 on total operations? Regular business would not be affected by this special order.
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