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.
If the firm produces the special order,the effect on income would be a
A)$360,000 increase.
B)$360,000 decrease.
C)$540,000 increase.
D)$540,000 decrease.

Question

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.
If the firm produces the special order,the effect on income would be a
A)$360,000 increase. 
B)$360,000 decrease. 
C)$540,000 increase. 
D)$540,000 decrease.

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.
If the firm produces the special order,the effect on income would be a
A)$360,000 increase. 
B)$360,000 decrease. 
C)$540,000 increase. 
D)$540,000 decrease.

The Following Information Relates to a Product Produced by Creamer