The Following Information Relates to the Klear Company for the Upcoming

question 34

Essay

The following information relates to the Klear Company for the upcoming year, based on 300,000 units:
$\begin{array}{lrr}&\text {Amount}&\text {Per Unit}\\ \text { Sales } & \$ 9,000,000 & \$ 30.00 \\\text { Cost of goods sold } & 7,200,000 & 24.00 \\\text { Gross margin } & 1,800,000 & 6.00 \\\text { Operating expenses } & 675,000 & 2.25\\\text { Operating profits }&\$1,125,000&\$3.75\end{array}$

The cost of goods sold includes $3,000,000 of fixed manufacturing overhead; the operating expenses include $450,000 of fixed marketing expenses. A special order offering to buy 50,000 units for $25.00 per unit has been made to Klear. Fortunately, there will be no additional operating expenses associated with the order and Klear has sufficient capacity to handle the order.
Required:
a. How much will operating profits increase if Klear accepts the special order?
b. Assume that Klear is operating at full capacity. How much will operating profits change if Klear accepts the special order?

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Definitions:

Programmed Situation

A scenario or environment designed or predetermined to follow a specific sequence of events or operations.

Certainty

The condition of being sure about something or having no doubt.

Risk

The potential for losing something of value or the possibility of an adverse outcome, often quantified in terms of probability and impact.

Objectivity

The practice of basing decisions or conclusions on unbiased facts and evidence rather than personal feelings or opinions.