HASF & Company produces cleaning kits for shotguns. The production capacity available will enable the firm to produce 50,000 kits annually. A projected income statement for next year shows
Sales                                   460,000
Costs of goods sold                                     296,000
Gross profit                                                 164,000
Selling and administrative expenses           125,000
Net income                                                    39,000          
Fixed manufacturing overhead costs 40% of  the cost of goods sold. Regular selling price per unit is 10 A 10% sales commission is paid to sales representatives for each kit sold. The purchasing department of a large discount chain has offered to purchase 1500 kits at $6 each. Company sales manager’s initial response is to refuse the offer because he concludes that the $6 price is below the firm’s average cost  The sales commission would not be paid on the special order.


What will be the impact on net income??

Answer rating: 100% (QA)

Profit 3209 Explanation Fixed component in cost of goods sold 29600040 118400 Variable compo... View the full answer