Plum Company produces and sells 30,000 bottles of plum sauce each year. The following information...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Plum Company produces and sells 30,000 bottles of plum sauce each year. The following information reflects a breakdown of its costs:
Cost Item
Costs per Bottle
Total Costs
Variable production costs
$14
$420,000
Fixed production costs
$9
$270,000
Variable selling costs
$5
$150,000
Fixed selling and administrative costs
$4
$120,000
Total costs
$32
$960,000
Plum marks up its prices 50% over full costs. It has surplus capacity to produce 10,000 more bottles. A Canadian supermarket company has offered to purchase 8,000 bottles of the product at a special price of $35 per bottle. Plum will incur additional shipping and selling costs of $2 per bottle to complete this order.
Required: (a) What will be the effect on Plum's operating income if it accepts this order? (b) Prepare a detailed analysis of the incremental costs and benefits.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
