The Following Information Relates to the Jasmine Company for the Upcoming

question 19

Multiple Choice

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


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; however, Jasmine is operating at full capacity. How much will operating profits increase if Jasmine accepts the special order?

• A) $50,000.
• B) $125,000.
• C) $200,000.
• D) Operating profits will not increase as a result of accepting the special order.

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Definitions:

Compute

The process of using mathematical operations to obtain a result or solve a problem.

Cost of Goods Manufactured

The total production cost for goods completed during a given period, including labor, material, and overhead costs.

Calculate

The process of determining a numerical result or figure, typically by mathematical means.

Period

A specific timeframe for which financial statements are prepared or accounting transactions are evaluated.