Question
Zenit incorporated sells a product called a surprise egg. The company has the capacity to produce 65,000 surprise eggs per year. Last year, the corporation
Zenit incorporated sells a product called a surprise egg. The company has the capacity to produce 65,000 surprise eggs per year. Last year, the corporation earned gross revenues of $3,500,000 by selling 30,000 eggs. The cost associated with producing 30,000 surprise eggs is provided below. Variable cost = $1,590,000 Fixed manufacturing overhead constant per year within the range of 12,000 through 60,000 surprise eggs = $500,000 Fixed selling expenses = $300,000Required: A) Assume that the corporation expects to sell only 50,000 surprise eggs through regular sales next year. A large retail chain has offered to purchase 10,000 surprise eggs if Maham incorporated is willing to accept a 25% discount off the regular price. As a result of this order, the fixed selling expenses would be eliminated by 25%. However, the corporation would have to purchase a special machine to engrave the retail chain's name on the 10,000 units. This machine would cost $20,000 and can engrave 10,000 units only. Determine the impact on profits next year if this special order is accepted. (urgent)
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