Omark Corporation currently manufactures a subassembly for its main product. The variable costs per unit are $48, in addition to a $6 charge based on estimated selling expenses.
R-Corp has contacted Omark with an offer to sell them 5,000 of the subassemblies for $44.00 each. Omark will eliminate $50,000 of fixed overhead if it accepts the proposal.
What is increase or decrease in profit from accepting the offer?
A) $50,000 increase
B) $100,000 increase
C) $170,000 increase
D) $50,000 decrease
E) $70,000 increase

Question

Quizplus · Accepted Answer

(($54 × 5,000) + $50,000) - ($44 × 5,000) = $100,000

Omark Corporation Currently Manufactures a Subassembly for Its Main Product