The Following Information Relates to a Product Produced by Creamer

question 21

Multiple Choice

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.

Recognize the accounting treatment for trade discounts and purchase discounts.

Identify the ownership and responsibility for freight costs in FOB shipping point and FOB destination terms.

Comprehend the role and recording of sales tax in accounting entries.

Understand the advantages of taking sales discounts for buyers.

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Definitions:

Relative Deprivation Theory

A theory that suggests individuals or groups feel deprived and discontent when they compare their positions to those more advantaged.

American Dream

The ideal that every US citizen should have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative.

Frustration

A psychological state of distress and annoyance resulting from being blocked in achieving a goal or satisfying a need.

Gluten Free

A diet excluding all foods containing gluten, a protein found in wheat, barley, rye, and derivatives.