Blueberry Company produces and sells 50,000 jars of jam each year. The following information reflects...
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Accounting
Blueberry Company produces and sells 50,000 jars of jam each year. The following information reflects a breakdown of its costs:
Cost Item
Costs per Jar
Total Costs
Variable production costs
$10
$500,000
Fixed production costs
$6
$300,000
Variable selling costs
$4
$200,000
Fixed selling and administrative costs
$2
$100,000
Total costs
$22
$1,100,000
Blueberry marks up its prices 50% over full costs. It has surplus capacity to produce 20,000 more jars. A Canadian supermarket company has offered to purchase 12,000 jars of the product at a special price of $28 per jar. Blueberry will incur additional shipping and selling costs of $2 per jar to complete this order.
Required: (a) What will be the effect on Blueberry's operating income if it accepts this order? (b) Prepare an incremental analysis for the decision.
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