genis battery company Incremental revenues and costs, special order Genis Battery Company is
considering accepting a special order for batteries that it received from
a discount retail store. The order specified a price of $ per unit, which
reflects a discount of $ per unit relative to the company's regular price of
$ per unit. Genis's accounting department has prepared the following
analysis to show the cost savings resulting from additional sales:
No additional fixed costs will be incurred for this order because the
company has surplus capacity. Because the average cost per unit will be
reduced from $ to $ Genis's president believes that a reduction in the
price to $ is justified for this order.
Required
a Should the order for the units at a price of $ be accepted? What will be the impact on
Genis's operating income?
b Is the accounting department's analysis the best way to evaluate this decision? If not, what
alternative method can you suggest?
c What other considerations are important in this case? Why?
