ment CALCULATOR PRINTER VERSION BACK Practice Question 11 ty

ment CALCULATOR PRINTER VERSION BACK Practice Question 11 ty. The product sells for $25. Homer Industries offers to purchase 5,000 units at $19 each. In the deal, Orkid will increase $2,500 increase $10,000. O decrease $30,000. decrease $5,000. 20 31 Click if you would like to Show Work for this question: en Shs.Wr Question Attempts: 0 of I used SAVE FOR LATER SUBNIT ANWER 0.42

Solution

Anwer:

Increase $2,500.

Working:

Fixed cost should not be considered because fixed cost is have to incurr irrespective of the new orders have been received or not.

So,

Total Variable Cost per unit of additonal units

Selling cost = $19.00 per unit

Profit/(loss) per unit = Sales price per unit - Variable cost per unit

= 19.00 - 18.50

= $0.50

Additonal Profit per unit = $0.50

Total Additional unit sold = $5,000

Increase in income = (Additional Unit sold * Additonal Profit per unit)

= (5,000 * $0.50)

Increase in income = $2,500

Cost	Amount
Variable cost per unit	$17.00
Special shipping cost	$1.50
Total Variable Cost	$18.50