Jet, Inc. makes a single product whose normal selling price is $20 per unit and variable cost is $8 per unit. A foreign distributor offers to purchase 3,000 units for $10 per unit. This is a one-time order that would not affect the company's regular business. Annual capacity is 10,000 units, but Jet, Inc. is currently producing and selling only 5,000 units, and fixed costs are unaffected by the order.

Should Jet accept the offer?

 

increase in revenue (3000*$10) $30,000

increase in costs (3000*$8 varable cost) 24,000

increase in net income 6000

therefore with regard to special orders we assumed that fixed costs are unaffected and that variable marketing costs must be incurred with the special order. Therefore jets accept the offfer since net income increases by 6000

Step-by-step explanation

increase in revenue (3000*$10) $30,000

increase in costs (3000*$8 varable cost) 24,000

increase in net income 6000

therefore with regard to special orders we assumed that fixed costs are unaffected and that variable marketing costs must be incurred with the special order. Therefore jets accept the offfer since net income increases by 6000