Bluebird mfg. has received a special one-time order for 15,000 bird feeders at $2.50 per unit. bluebird currently produces and sells 75,000 units at $6.50 each. this level represents 80% of its capacity. these bird feeders would be marketed under the wholesaler's name and would not affect bluebird's sales through its normal channels. production costs for these units are $3.65 per unit, which includes $2.00 variable cost and $1.65 fixed cost. if bluebird accepts this additional business, the effect on net income will be:

since the units can be produced within existing plant capacity, the special order will not increase fixed costs. Let’s identify the relevant data for the decision. First, the variable
manufacturing costs will increase $30000 (15000×2). Second, the expected revenue will increase $37500 (15000×2.5). Thus, will increase its net income by $7500 (37500-30000) by accepting this special order.

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gauravsingh23VT gauravsingh23VT · Answer 2 · 2022-06-09T13:07:51+02:00

Manufacturing costs will addition (15000×2) = $30000. Second, the expected revenue will increase (15000×2.5) = $37500. Thus, will increase its net income by (37500-30000) = $7500 by accepting this special order.

What is manufacturing cost?

Manufacturing cost is the sum total cost of the production of the goods and services. It starts when the raw material purchased till the finished goods, all the cost occurred between the process is included in it.

Some of the manufacturing cost are the Direct material, direct labor, and manufacturing overhead are all included in these prices.

Thus, $7500 will be the net income.

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