Question
A company makes a single product that is normally sells for $56/unit. It has the capacity to produce 100,000 units per year, but currently produces
A company makes a single product that is normally sells for $56/unit. It has the capacity to produce 100,000 units per year, but currently produces only 70,000. Per-unit costs associated with the product at an annual production level of 70,000 are below:
Variable production cost per unit $33
Variable selling cost per unit $11
Fixed production cost per unit $13
Fixed selling cost per unit $17
A foreign distributor wants to buy 3,000 units and has offered to pay $51 each. Additional information:
If the company accepts this order, it would incur $10,000 in additional legal costs to comply with export regulations.
No selling costs would be incurred for this order.
What would be the total financial impact of accepting this offer?
(Make sure to calculate the total impact, not the per-unit amount. Use a negative number to indicate a decrease in cash flows.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started