Raspberry Company produces and sells 40,000 bottles of raspberry syrup each year. The following information...
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Accounting
Raspberry Company produces and sells 40,000 bottles of raspberry syrup each year. The following information reflects a breakdown of its costs:
Cost Item
Costs per Bottle
Total Costs
Variable production costs
$12
$480,000
Fixed production costs
$7
$280,000
Variable selling costs
$6
$240,000
Fixed selling and administrative costs
$3
$120,000
Total costs
$28
$1,120,000
Raspberry marks up its prices 35% over full costs. It has surplus capacity to produce 25,000 more bottles. A German supermarket company has offered to purchase 15,000 bottles of the product at a special price of $30 per bottle. Raspberry will incur additional shipping and selling costs of $1 per bottle to complete this order.
Required: (a) What will be the effect on Raspberry's operating income if it accepts this order? (b) Calculate the contribution margin for the additional order.
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