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genis battery company 5-45 Incremental revenues and costs, special order Genis Battery Company is ...

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Accounting

genis battery company 5-45 Incremental revenues and costs, special order Genis Battery Company is
considering accepting a special order for 50,000 batteries that it received from
a discount retail store. The order specified a price of $4 per unit, which
reflects a discount of $0.50 per unit relative to the company's regular price of
$4.50 per unit. Genis's accounting department has prepared the following
analysis to show the cost savings resulting from additional sales:
No additional fixed costs will be incurred for this order because the
company has surplus capacity. Because the average cost per unit will be
reduced from $4.20 to $3.90, Genis's president believes that a reduction in the
price to $4 is justified for this order.
Required
a. Should the order for the 50,000 units at a price of $4 be accepted? What will be the impact on
Genis's operating income?
b. Is the accounting department's analysis the best way to evaluate this decision? If not, what
alternative method can you suggest?
c. What other considerations are important in this case? Why?
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