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20.2 Special Orders
Harvest, Inc. has received a special order for 3,000 boxes of crystal glassware for $30 per box. Harvest's variable costs per box are
$24, fixed costs per box are an additional $10 per box, and the normal selling price is $70 per box. Harvest has sufficient capacity to
produce the glassware. Harvest will incur special shipping costs of $2 per box for this special order. If the order is accepted, what will
be the effect on net income?
O $90,000 increase
$12,000 increase
O $18,000 decrease
O $12,000 decrease
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Sagot :

Anthougoidn

If the special order for 3,000 boxes of crystal glassware is accepted, the effect on the net income of Harvest, Inc. is an increase of $12,000.

What is break-even analysis?

Break-even analysis is an accounting technique to ensure that a company does not incur losses from its transactions.

Using the technique, a corporation ensures that the total costs are at least equal to the total revenue or the contribution margin is sufficient to cover the fixed costs, which are not variable within a relevant range.

The technique is based on the concepts of contribution margin and variable costing.

Data and Calculations:

Special order units = 3,000 boxes

Price per box for special order = $30

Variable costs per box = $24

Special shipping costs per box for the special order = $2

Contribution margin per box = $4 ($30 - $24 - $2)

Total Contribution Margin = $12,000 ($4 x 3,000)

Fixed costs = $30,000 ($10 x 3,000)

Normall selling price per box = $70

Thus, if the special order for 3,000 boxes of crystal glassware is accepted, the effect on the net income of Harvest, Inc. is an increase of $12,000.

Learn more about accepting special orders at https://brainly.com/question/25307534

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