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Farrow Co. expects to sell 500,000 units of its product in the next period with the following results. Sales (500,000 units) Costs and expenses 7,500,000 Direct materials Direct labor Overhead Selling expenses Administrative expenses 1,000,000 2,000,000 500,000 750,000 Total costs and expenses Net income $1,965,000 The company has an opportunity to sell 50,000 additional units at $12 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $215,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit Additional Combined Normal Volume Volume Costs and expenses: Total costs and expenses Incremental income (loss) from new business
The company has an opportunity to sell 50,000 additional units at $12 per unit. The additional sales would not affect its current per unit would be the same for the additional u nits as they However, the additional volume would create the following incremental costs: () total overhead would increase administrative expenses would increase by $215,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit Normal Volume Additional Combined Total Costs and expenses: Total costs and expenses Incremental income (loss) from new business s Should the company accept or reject the offer? O The company should reject the offer The company should accept the offer
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