Zucchini Company produces and sells 35,000 packs of zucchini noodles each year. The following information...
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Accounting
Zucchini Company produces and sells 35,000 packs of zucchini noodles each year. The following information reflects a breakdown of its costs:
Cost Item | Costs per Pack | Total Costs |
Variable production costs | $12 | $420,000 |
Fixed production costs | $8 | $280,000 |
Variable selling costs | $5 | $175,000 |
Fixed selling and administrative costs | $3 | $105,000 |
Total costs | $28 | $980,000 |
Zucchini marks up its prices 50% over full costs. It has surplus capacity to produce 10,000 more packs. A South African supermarket company has offered to purchase 8,000 packs of the product at a special price of $32 per pack. Zucchini will incur additional shipping and selling costs of $2 per pack to complete this order.
Required: (a) What will be the effect on Zucchini's operating income if it accepts this order? (b) Calculate the incremental revenue and costs associated with the order.
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