Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,0

Question

Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $21,900 to buy 680 units from Carry-ALL. Total fixed costs are $7,000 per year. This offer does not affect Carry-ALL's other planned operations. The incremental revenues for this situation are

Question 7

Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much?

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Incremental Revenues would be equal to the additional amount of money received by the company from Michael Co. since this offer doesn't affect the company's other planned operations.

Incremental Revenue = 21900

Incremental Income = Incremental Revenues - Incremental Variable Costs = 21900 - 680*20 = 8300

Thanks.

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