Kansas Company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows: $$\begin{array} { l l }
\text { Variable-unit-based costs } & \$ 10 \text { per unit } \
\text { Fixed costs } & \$ 2 \text { per unit } \
\text { Set-up costs } & \$ 3 \text { per unit } \
& \$ 15 \text { per unit }
\end{array}$$ A total of 500 set-ups at a cost of $120 per set-up are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available, but these 5,000 would require 60 set-ups.If Kansas Company accepts the special order, Kansas Company's cost will increase by _____.
A)$7,200
B)$40,000
C)$57,200
D)$65,000

Question

Kansas Company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows: $$\begin{array} { l l } 
\text { Variable-unit-based costs } & \$ 10 \text { per unit } \
\text { Fixed costs } & \$ 2 \text { per unit } \
\text { Set-up costs } & \$ 3 \text { per unit } \
& \$ 15 \text { per unit }
\end{array}$$ A total of 500 set-ups at a cost of $120 per set-up are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available, but these 5,000 would require 60 set-ups.If Kansas Company accepts the special order, Kansas Company's cost will increase by _____.
A)$7,200
B)$40,000
C)$57,200
D)$65,000

Quizplus · Accepted Answer

The cost increase includes variable costs for 5,000 units ($10 x 5,000 = $50,000) and set-up costs for 60 set-ups ($120 x 60 = $7,200), totaling $57,200.

Kansas Company Produces and Sells 20,000 Units at $22 Per