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blossom enterprises produces giant stuffed bears. each bear consists of $14 of variable costs and $11 of fixed costs and sells for $47. a wholesaler offers to buy 9,920 units at $16 each, for which blossom has the capacity to produce. blossom will incur extra shipping costs of $1 per bear. determine the incremental income or loss that blossom enterprises would realize by accepting the special order.



Answer :

Blossom enterprise would realize $19920 incremental income by accepting the special Oder.

What is variable cost?

An expense for the company that varies according on how much is produced or sold is called a variable cost. Depending on a company's production or sales volume, variable costs grow or fall. They climb as production rises.

The number of bears that ordered by whole seller is 9,920 units.

Incremental revenue of the company is (9,920 × $16) = $168,720

Incremental cost is ($14 × 9,920) = $138,880

Additional shipping expenses ($1 × 9,920) = $9,920

The total cost to produced 9,920 bears is ($138,880 + $9,920) = $148,800

The incremental income that blossom enterprises would realize by accepting the special order is ($168,720 - $148,800) = $19920.

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