The following information relates to a product produced by Creamer Company: Fixed selling costs are $500,000 per year,and variable selling costs are $12 per unit sold.Although production capacity is 600,000 units per year,the company expects to produce only 400,000 units next year.The product normally sells for $120 each.A customer has offered to buy 60,000 units for $90 each.
Suppose the firm produces the special order.What would be the effect on Creamer's annual income?
$\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labour } & 15 \
\text { Variable overhead } & 30 \
\text { Fixed overhead } & 18 \
\text { Unit cost } & \$ 87
\end{array}$
A)a $360,000 increase
B)a $360,000 decrease
C)a $540,000 increase
D)a $540,000 decrease

Question

Quizplus · Accepted Answer

The Answer of The following information relates to a product produced by Creamer Company: Fixed selling costs are $500,000 per year,and variable selling costs are $12 per unit sold.Although production capacity is 600,000 units per year,the company expects to produce only 400,000 units next year.The product normally sells for $120 each.A customer has offered to buy 60,000 units for $90 each.
Suppose the firm produces the special order.What would be the effect on Creamer's annual income?
$\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labour } & 15 \
\text { Variable overhead } & 30 \
\text { Fixed overhead } & 18 \
\text { Unit cost } & \$ 87
\end{array}$
A)a $360,000 increase
B)a $360,000 decrease
C)a $540,000 increase
D)a $540,000 decrease

The Following Information Relates to a Product Produced by Creamer