Markson company had the following results of operations for the past year: sales (8,000 units at $21.00) $168,000 variable manufacturing costs $90,000 fixed manufacturing costs 16,000 variable selling and administrative expenses 16,000 fixed selling and administrative expenses 21,000 (143,000) operating income $25,000 a foreign company whose sales will not affect markson's market offers to buy 2,000 units at $15.50 per unit. in addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,700 for the purchase of special tools. if markson accepts this additional business, its profits will:

Effect on income= $2,800 increase

Explanation:

Giving the following information:

Variable manufacturing costs $90,000

Unitary cost= (90,000/8,000)= $11.25

Variable selling and administrative expenses 16,000

Unitary Variable selling and administrative expenses= 16,000/8,000= 2

A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $15.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,700 for the purchase of special tools.

Because it is a special offer that will not affect the current sales, we will have into account the incremental fixed costs only.

Effect on income= (2,000*15.5) - 2,000*(11.25+2) - 1,700= $2,800 increase.

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