JNR Products produces and sells plastic soft drink cups with specialised logos on the front.They sell the cups in batches of 500 for $125 per batch.The company has the capacity to produce 100 batches per month but averages much less.When 75 batches are sold a month,each batch has $40 worth of variable costs and $5 worth of fixed overhead costs allocated to it.The company has been approached by a local fireman's association who wishes to purchase three batches of cups for $50 per batch.If the special order were accepted,net income would:

Question

Quizplus · Accepted Answer

The special order would increase net income by $30. The calculation is as follows: For each batch sold to the fireman's association at $50, the variable costs are $40, leaving a contribution margin of $10 per batch. Since there are no additional fixed costs associated with the order, all of this contribution margin goes directly to increasing net income. For three batches, this results in an increase of $30 ($10 per batch * 3 batches).

JNR Products Produces and Sells Plastic Soft Drink Cups with Specialised