Fixed selling costs are $500,000 per year. Variable selling costs of $2 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Southern expects to produce only 400,000 units next year. The product normally sells for $50 each. A customer has offered to buy 50,000 units for $24 each. The customer will pay the transportation charge on the units purchased. If Southern produces the special order, the effect on income would be a a. $650,000 increase b. $650,000 decrease c. $550,000 decrease d. $550,000 increase e. None of the above
Fixed selling costs are $500,000 per year. Variable selling costs of $2 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Southern expects to produce only 400,000 units next year. The product normally sells for $50 each. A customer has offered to buy 50,000 units for $24 each. The customer will pay the transportation charge on the units purchased. If Southern produces the special order, the effect on income would be a a. $650,000 increase b. $650,000 decrease c. $550,000 decrease d. $550,000 increase e. None of the above
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 6MC: Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling...
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Fixed selling costs are $500,000 per year. Variable selling costs of $2 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Southern expects to produce only 400,000 units next year. The product normally sells for $50 each. A customer has offered to buy 50,000 units for $24 each. The customer will pay the transportation charge on the units purchased. If Southern produces the special order, the effect on income would be a
a.
$650,000 increase
b.
$650,000 decrease
c.
$550,000 decrease
d.
$550,000 increase
e.
None of the above
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