The Buchanan Company Has Gathered the Following Information for a Unit

question 67

Multiple Choice

The Buchanan Company has gathered the following information for a unit of its most popular product: The above cost information is based on 10,000 units.A distributor has offered to buy 2,000 units at a price of $32 per unit.The distributor claims this special order would not disturb regular sales at $42.Special packaging and other selling expenses would be an additional $0.50 per unit for the special order.How many units of regular sales could be lost before this contract is not profitable?

• A)0 units.
• B)950 units.
• C)1,000 units.
• D)2,000 units.
• E)10,000 units.

---

Definitions:

Intra-entity Gross Profit

The profit made from transactions between divisions or units within the same company before external sales.

Inventory Costing

The method used to assign costs to inventory, including approaches such as FIFO, LIFO, and weighted average cost.

Equity Method

An accounting technique used to record investments in other companies, where the investment's value is adjusted based on the investor's share of the investee’s profits or losses.

Merchandise

Goods that are purchased, held, and then sold by a business with the intention of making a profit.