Asked by Sebastian Alonso on May 07, 2024
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Markson Company had the following results of operations for the past year: Sales (8,000 units at $20) $160,000 Variable manufacturing costs $86,000 Fixed manufacturing costs 15,000 Variable administrative expenses 12,000 Fixed selling and administrative expenses 20,000(133,000) Operating income$27,000\begin{array}{lrr}\text { Sales }(8,000 \text { units at } \$ 20) & & \$ 160,000 \\\text { Variable manufacturing costs } & \$ 86,000 & \\\text { Fixed manufacturing costs } & 15,000 & \\\text { Variable administrative expenses } & 12,000 & \\\text { Fixed selling and administrative expenses } & 20,000 & (133,000) \\\hline\text {Operating income}&&\$ 27,000 \\\hline\end{array} Sales (8,000 units at $20) Variable manufacturing costs Fixed manufacturing costs Variable administrative expenses Fixed selling and administrative expenses Operating income$86,00015,00012,00020,000$160,000(133,000) $27,000 A foreign company offers to buy 2,000 units at $14 per unit.In addition to variable manufacturing and administrative costs,selling these units would increase fixed overhead by $1,600 for the purchase of special tools.Markson's annual productive capacity is 12,000 units.If Markson accepts this additional business,its profits will:
A) Increase by $3,500.
B) Decrease by $5,650.
C) Decrease by $1,600.
D) Increase by $1,900.
E) Decrease by $5,100.
Variable Manufacturing Costs
Costs that vary in direct proportion to changes in production volume, including costs such as raw materials and direct labor.
Operating Income
The profit realized from a business's operations after deducting operating expenses from gross profit.
Special Tools
Custom or unique tools designed for specific tasks or projects, often not found in standard toolsets.
- Execute the principles of incremental analysis for decisions related to special orders.
- Assess the viability of receiving specialized orders, considering the impacts of capacity limitations.
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Learning Objectives
- Execute the principles of incremental analysis for decisions related to special orders.
- Assess the viability of receiving specialized orders, considering the impacts of capacity limitations.
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