The Following Information Relates to the Jasmine Company for the Upcoming

question 138

Multiple Choice

The following information relates to the Jasmine Company for the upcoming year, based on 400,000 units:
$\begin{array}{lrr}&\text { Amount}&\text { Per Unit}\\\text { Sales } & \$ 8,000,000 & \$ 20.00\\\text { Cost of goods sold } & \underline{6,400,000} & \underline{16.00 }\\\text { Gross margin } &1,600,000& 4.00 \\\text { Operating expenses } &\underline{ 600,000 }&\underline{ 1.50} \\\text { Operating profits } & \underline{ \$ 1,000,000} &\underline{ \$2.50}\end{array}$

The cost of goods sold includes $2,400,000 of fixed manufacturing overhead; the operating expenses include $200,000 of fixed marketing expenses. A special order offering to buy 50,000 units for $15.00 per unit has been made to Jasmine.
- Fortunately, there will be no additional operating expenses associated with the order and Jasmine has sufficient capacity to handle the order. How much will operating profits increase if Jasmine accepts the special order?

• A) $50,000
• B) $125,000
• C) $200,000
• D) $250,000

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Definitions:

Marginal Utility

The change in satisfaction or utility an individual gains from consuming an additional unit of a good or service.

MU/P Ratio

The MU/P Ratio stands for the marginal utility to price ratio, used in economics to analyze consumer choice by comparing the additional satisfaction (utility) received from an increase in consumption of a good relative to its price.

Marginal Utility

The alteration in pleasure or usefulness a person receives from using an extra unit of a product or service.

Laws of Economics

Fundamental principles that govern economic behavior and interactions, such as supply and demand, cost-benefit analysis, and incentives.