CH 10 EX 10-2

Farrow Co. expects to sell 300,000 units of its product in the next period with the following results. $4,500,000 Sales (300,000 units) Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses Net income 600,000 1,200,000 300,000 450,000 771,000 3,321,000 $1,179,000 The company has an opportunity to sell 30,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $129,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit. Should the company accept or reject the offer? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Net Income Accept or Reject Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit. Normal Volume Additional Volume Combined Total Costs and expenses: Total costs and expenses Incremental income (loss) from new business Net Income Accept or Reject Complete this question by entering your answers in the tabs below. Net Income Accept or Reject Should the company accept or reject the offer? Should the company accept or reject the offer?