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Company produces and sells

55 comma 00055,000

boxes of specialty foods each year. Each box contains the same assortment of food. The company has computed the following annual costs:

Cost Item	Total Costs
Variable production costs	$330,000
Fixed production costs	520,000
Variable selling costs	165,000
Fixed selling and administrative costs	160,000
Total costs	$1,175,000

GarrardGarrard

normally charges

$ 21$21

per box. A new distributor has offered to purchase

5 comma 5005,500

boxes at a special price of

$ 17$17

per box.

GarrardGarrard

will incur additional packaging costs of

$ 1$1

per box to complete this order.

Requirements

(a)	Suppose GarrardGarrard has surplus capacity to produce 5 comma 5005,500 more boxes. What will be the effect on GarrardGarrard's income if it accepts this order?
(b)	Suppose that instead of having surplus capacity to produce 5 comma 5005,500 moreboxes, GarrardGarrard has surplus capacity to produce only 1 comma 5001,500 more boxes. What will be the effect on GarrardGarrard's income if it accepts the new order for 5 comma 5005,500 boxes?

Requirement (a) Suppose

GarrardGarrard

has surplus capacity to produce

5 comma 5005,500

more boxes. What will be the effect on

GarrardGarrard's

income if it accepts this order?

Select the items that are relevant if the order is accepted, then calculate the effect on income. (Only complete the necessary answer boxes. Use parentheses or a minus sign for a net decrease in income.)

	in income

Answer & Explanation Solved by verified expert

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