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16 June, 00:53

Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1 per bear. Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order.

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  1. 16 June, 04:42
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    Pederson enterprise would realize $8,000 incremental income by accepting the special Oder.

    Explanation:

    Pederson Enterprise

    Incremental revenue (8,000 * $14)

    $112,000

    Incremental variable costs ($12 * 8,000). (96,000)

    Incremental shipping costs

    ($1*8,000) (8,000)

    Incremental profit if special order accepted. $8,000

    Pederson enterprise would realize $8,000 incremental income by accepting the special Oder as shown in the table above.
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