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Berry Company produces and sells 2 0 , 0 0 0 cases of fruit preserves each year. The following information reflects breakdown of its costs:
Berry Company produces and sells cases of fruit preserves each year. The following information reflects breakdown of its costs:
COST ITEM
COSTS PER CASE
Variable production costs
RM
Fixed productions costs
RM
Variable selling costs
RM
Fixed selling and administrative costs
RM
Total costs
RM
TOTAL COSTS
RM
RM
RM
RM
RM
Berry marks up its prices over full costs. It has surplus capacity to produce more cases. A French supermarket company has offered to purchase cases of the product at a special price of RM per case.
Berry will incur additional shipping and selling costs of RM per case to complete this order.
What will be the effect on Berry's operating income if it accepts this order?
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