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Stryker Industries received an offer from an exporter for 15,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available: Domestic unit sales price $20 Unit manufacturing costs: Variable 11 Fixed 1 What is the amount of income or loss from acceptance of the offer? A. $94,500 loss B. $97,500 income C. $37,500 income D. $37,500 loss

Question

Stryker Industries received an offer from an exporter for 15,000 units of product at 17.50perunit.Theacceptanceoftheofferwillnotaffectnormalproductionordomesticsalesprices.Thefollowingdataisavailable:Domesticunitsalesprice17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available: Domestic unit sales price 20 Unit manufacturing costs: Variable 11 Fixed 1 What is the amount of income or loss from acceptance of the offer? A. 94,500lossB.94,500 loss B. 97,500 income C. 37,500incomeD.37,500 income D. 37,500 loss

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Solution

To calculate the income or loss from acceptance of the offer, we need to consider the offer price and the unit manufacturing costs (both variable and fixed).

Step 1: Calculate the total revenue from the offer The offer is for 15,000 units at 17.50perunit.So,thetotalrevenuefromtheofferwouldbe15,000units17.50 per unit. So, the total revenue from the offer would be 15,000 units * 17.50/unit = $262,500.

Step 2: Calculate the total manufacturing cost The unit manufacturing cost is the sum of the variable and fixed costs, which is 11+11 + 1 = 12perunit.So,thetotalmanufacturingcostforthe15,000unitswouldbe15,000units12 per unit. So, the total manufacturing cost for the 15,000 units would be 15,000 units * 12/unit = $180,000.

Step 3: Calculate the income or loss The income or loss from the offer is the total revenue minus the total manufacturing cost. So, the income or loss would be 262,500262,500 - 180,000 = $82,500.

So, the answer is not listed in the options. There seems to be a mistake in the question or the options provided.

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