Assume that after introducing the new product, the company finds that it has excess capacity. A foreign dealer has offered to purchase 2,000 units at a special price of $36 per unit. This sale would not disturb regular business. If the special price is accepted on the 2,000 units, the company's overall net income for the year should:
A)decrease by $24,000
B)increase by $20,000
C)increase by $8,000
D)increase by $32,000

Question

Quizplus · Accepted Answer

The special price of $36 per unit is higher than the variable cost of $28 per unit, so the company will make a profit on each unit sold. The profit on the 2,000 units will be $8 per unit, or a total of $16,000. This will increase the company's overall net income for the year by $16,000.

Assume That After Introducing the New Product, the Company Finds