Collegiate Products produces and sells padded stadium seats emblazoned with a university logo.The company has the capacity to produce as many as 6000 seats per month but consistently averages much less.When 4500 seats are produced,each seat has $5 of variable costs and $2 of fixed overhead costs allocated to it.The seats typically sell for $25 each.The company has been approached by a small college who wishes to purchase 500 seats for special alumni at a price of $5 per seat.If the special order were accepted,net income would:

Question

Quizplus · Accepted Answer

Since the variable cost per seat is $5 and the special order is also at $5 per seat, the revenue from the special order would exactly cover the variable costs of producing the seats. There would be no change to net income because the fixed costs are already covered by the regular production, and this special order does not add any additional fixed costs.

Collegiate Products Produces and Sells Padded Stadium Seats Emblazoned with a University