Aerotoy Company Makes Toy Airplanes

question 57

Multiple Choice

Aerotoy Company makes toy airplanes.One plane is an excellent replica of a 737; it sells for $5.Vacation Airlines wants to purchase 12,000 planes at $1.75 each to give to children flying unaccompanied.Costs per plane are as follows: No variable marketing costs would be incurred.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable.However,Vacation Airlines wants its own logo and colors on the planes.The cost of the decals is $0.01 per plane and a special machine costing $1,500 would be required to affix the decals.After the order is complete,the machine would be scrapped.Should the special order be accepted?

• A)Yes,income will increase by $300
• B)No,income will decrease by $180
• C)No,income will decrease by $1,500
• D)Yes,income will increase by $180
• E)It doesn't matter; there will be no change in income

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Definitions:

Japanese Yen

Japanese Yen is the official currency of Japan, known internationally by the ISO code JPY.

U.S. Dollars

The currency of the United States of America, used as the standard unit of money in international trade and domestic transactions.

Airline Ticket

A document, either electronic or paper, issued by an airline to confirm an individual's entitlement to a seat on a flight.

Euro

The Euro is the official currency of 19 out of the 27 European Union countries, which together make up the Eurozone.