Beetroot Company produces and sells 25,000 bottles of beetroot juice each year. The following information...
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Accounting
Beetroot Company produces and sells 25,000 bottles of beetroot juice each year. The following information reflects a breakdown of its costs:
Cost Item
Costs per Bottle
Total Costs
Variable production costs
$12
$300,000
Fixed production costs
$7
$175,000
Variable selling costs
$5
$125,000
Fixed selling and administrative costs
$3
$75,000
Total costs
$27
$675,000
Beetroot marks up its prices 45% over full costs. It has surplus capacity to produce 10,000 more bottles. A Portuguese supermarket company has offered to purchase 8,000 bottles of the product at a special price of $32 per bottle. Beetroot will incur additional shipping and selling costs of $1 per bottle to complete this order.
Required: (a) What will be the effect on Beetroot's operating income if it accepts this order? (b) Calculate the incremental revenue and costs associated with the order.
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