Pineapple Company produces and sells 60,000 cans of pineapple slices each year. The following information...
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Accounting
Pineapple Company produces and sells 60,000 cans of pineapple slices each year. The following information reflects a breakdown of its costs:
Cost Item
Costs per Can
Total Costs
Variable production costs
$16
$960,000
Fixed production costs
$7
$420,000
Variable selling costs
$5
$300,000
Fixed selling and administrative costs
$3
$180,000
Total costs
$31
$1,860,000
Pineapple marks up its prices 50% over full costs. It has surplus capacity to produce 20,000 more cans. A Korean supermarket company has offered to purchase 15,000 cans of the product at a special price of $35 per can. Pineapple will incur additional shipping and selling costs of $1.50 per can to complete this order.
Required: (a) What will be the effect on Pineapple's operating income if it accepts this order? (b) Analyze the effect on the company's overall contribution margin.
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