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

SUPPORTING CALCULATIONS:
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The Following Information Relates to a Product Produced by Creamer