If Wagner accepts the special order, income before taxes will a

Accounting Apr 01, 2021

If Wagner accepts the special order, income before taxes will a. Decrease by $100,000 b. Increase by $125,000 c. Increase by $25,000 d. Some other amount

Expert Solution

Statement showing Change in Net Income:
Additional capacity available	90000	=490000-400000
Regular sales lost	10000	=100000-90000

Special order price	16.25	=25*(1-35%)

Incremental revenue	1625000	*=10000016.25**
Less: Incremental variable cost	1500000	=100000*15
Less: Contribution margin lost on regular sales	100000	=10000*(25-15)
Net change in income	25000

So, the correct option is C "Increase by $25,000".

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