Bluebird Mfg

question 136

Multiple Choice

Bluebird Mfg.has received a special one-time order for 15,000 bird feeders at $3 per unit.Bluebird currently produces and sells 75,000 units at $7.00 each.This level represents 80% of its capacity.These bird feeders would be marketed under the wholesaler's name and would not affect Bluebird's sales through its normal channels.Production costs for these units are $3.50 per unit,which includes $2.25 variable cost and $1.25 fixed cost.If Bluebird accepts this additional business,the effect on net income will be:

• A)$45,000 increase.
• B)$11,250 increase.
• C)$33,750 increase.
• D)$7,500 decrease.
• E)$33,750 decrease.