Travers Company is contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units (the total capacity of their factory). Travers Company is presently manufacturing 7000 units in their factory.
Direct Materials $8 Direct Labor $11 Variable Overhead $8 Fixed Overhead $6 Poppins Company wants to purchase 2,000 units at a special unit price of $35.
The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $6,175 in order to stamp the company’s logo on the product.

What is the amount of the incremental income (loss) from accepting the order? (your answer should be the total incremental profit or loss for ALL 2000 units, not just one unit) If your answer is a loss, put a minus sign in front of your answer.
Input your answer without dollar signs or commas. DON'T ROUND ANY NUMBER EXCEPT YOUR FINAL ANSWER.

Direct Materials $8 Direct Labor $11 Variable Overhead $8 Fixed Overhead $6 Poppins Company wants to purchase 2,000 units at a special unit price of $35.

Also, a special stamping machine will have to be purchased for $6,175 to stamp the company’s logo on the product.

Because there is unused capacity and it is a special offer, we will not have into account the fixed overhead costs.

Unitary cost= 8 + 11 + 8= $27

Fixed costs= 6,175

Incremental income= (35 - 27)*2000 - 6175= $9,825

deebikamadhivanan deebikamadhivanan · Answer 2 · 2022-03-23T11:59:57+01:00

While incremental revenue is the profit made by a company as a result of manufacturing more products, incremental profit is the profit made by a firm as a result of generating additional. The incremental income amounted to $9,825

What is the incremental income?

Using 10,000 units as a base (the total capacity of their factory). In their plant, Travers Company is now producing 7000 units.

$8 for direct materials

$11 for direct labor

$8 for variable overhead

$6 for fixed overhead

The company wants to buy 2,000 devices at a discounted price of $35 per unit.

In addition, $6,175 stamping equipment will be needed to stamp the company's emblem on the product.

We will not take fixed overhead costs into consideration because there is unused capacity and it is a special offer.

[tex]\text{Unitary cost}= 8 + 11 + 8= $27\\\text{Unitary cost}= 27 \text{ dollars}\\\text{Fixed costs}= 6,175\\\text{Incremental income}= (35 - 27) \text{ x } 2000 - 6175\\\text{ Incremental income} = 9,825 \text{ dollars}[/tex]

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