The Following Information Relates to the Tram Company for the Upcoming

question 18

Multiple Choice

The following information relates to the Tram Company for the upcoming year. The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed marketing expenses.A special order offering to buy 50,000 units for $7.50 per unit has been made to Tram.Fortunately,there will be no additional operating expenses associated with the order and Tram has sufficient capacity to handle the order.How much will operate profits be increased if Tram accepts the special order?

• A)$25,000
• B)$62,500
• C)$100,000
• D)$125,000
• E)Operating profits will not increase as a result of accepting the special order.

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Definitions:

Commitment Fee

A charge imposed by a lender on a borrower for not utilizing a credit line or for funds that have not been disbursed.

Revolving Credit

A flexible credit line that allows individuals or businesses to borrow, repay, and borrow again up to a certain limit, commonly seen in credit cards and lines of credit.

Interest Expense

It refers to the cost incurred by an organization or individual for borrowing funds, typically represented as a yearly interest rate applied to the loan's principal amount.

Prime Rate

The interest rate that banks charge their most credit-worthy customers, often used as a benchmark in lending rates.