Reference no: EM133038161

Question - Dawson Company produces and sells 65,000 boxes of specialty foods each year. Each box contains the same assortment of food. The company has computed the following annual?

Cost Item Total Costs

Variable production costs $325000

Fixed production costs 490000

Variable selling costs 390000

Fixed selling and administrative costs 140000

Total costs $1345000

Dawson normally charges $ 30 per box. A new distributor has offered to purchase 6500 boxes at a special price of $28 per box. Dawson will incur additional packaging costs of $1 per box to complete this order.

Requirements -

(a) Suppose Dawson has surplus capacity to produce 6500 more boxes. What will be the effect on Dawson's income if it accepts this order?

(b) Suppose that instead of having surplus capacity to produce 6500 more? boxes, Dawson has surplus capacity to produce only 3,500 more boxes. What will be the effect on Dawson's income if it accepts the new order for 6500? boxes?