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A product normally sells for $200 per unit. A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products. What is incremental net income per unit from accepting this special order?

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Answer:

Effect on income= $2 increase per unit

Explanation:

Giving the following information:

A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products.

We need to calculate the effect on income using the following formula:

Effect on income= sales - unitary variable costs

Effect on income= 180 - (160 + 180*0.1)= $2 increase per unit

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