Mango Company produces and sells 45,000 bottles of mango puree each year. The following information...
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Accounting
Mango Company produces and sells 45,000 bottles of mango puree each year. The following information reflects a breakdown of its costs:
Cost Item | Costs per Bottle | Total Costs |
Variable production costs | $13 | $585,000 |
Fixed production costs | $9 | $405,000 |
Variable selling costs | $6 | $270,000 |
Fixed selling and administrative costs | $4 | $180,000 |
Total costs | $32 | $1,440,000 |
Mango marks up its prices 35% over full costs. It has surplus capacity to produce 15,000 more bottles. A Spanish supermarket company has offered to purchase 10,000 bottles of the product at a special price of $38 per bottle. Mango will incur additional shipping and selling costs of $2 per bottle to complete this order.
Required: (a) What will be the effect on Mango's operating income if it accepts this order? (b) Analyze the effect on the company's overall contribution margin.
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