Blackberry Company produces and sells 35,000 cartons of blackberry puree each year. The following information...
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Accounting
Blackberry Company produces and sells 35,000 cartons of blackberry puree each year. The following information reflects a breakdown of its costs:
Cost Item
Costs per Carton
Total Costs
Variable production costs
$15
$525,000
Fixed production costs
$9
$315,000
Variable selling costs
$6
$210,000
Fixed selling and administrative costs
$3
$105,000
Total costs
$33
$1,155,000
Blackberry marks up its prices 50% over full costs. It has surplus capacity to produce 15,000 more cartons. A Swedish supermarket company has offered to purchase 10,000 cartons of the product at a special price of $36 per carton. Blackberry will incur additional shipping and selling costs of $1.50 per carton to complete this order.
Required: (a) What will be the effect on Blackberry's operating income if it accepts this order? (b) Calculate the incremental revenue and costs associated with the order.
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