A product normally sells for $200 per unit. A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products. What is incremental net income per unit from accepting this special order?

Question

Business

Eden Black

14 January, 08:16

A product normally sells for $200 per unit. A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products. What is incremental net income per unit from accepting this special order?

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Answers (1)

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Natalie Carrillo · Answer 1

Effect on income = $2 increase per unit

Explanation:

Giving the following information:

A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products.

We need to calculate the effect on income using the following formula:

Effect on income = sales - unitary variable costs

Effect on income = 180 - (160 + 180*0.1) = $2 increase per unit