The Following Information Relates to a Product Produced by Orca

question 120

Multiple Choice

The following information relates to a product produced by Orca Company:
$$\begin{array} { l r } \text { Direct materials } & \$ 20 \\\text { Direct labor } & 14 \\\text { Variable overhead } & 12 \\\text { Fixed overhead } &\underline{ 16} \\ \text { Unit cost } &\underline{ \$ 62 }\\\end{array}$$
Fixed selling costs are $1,000,000 per year. Although production capacity is 500,000 units per year, Orca expects to produce only 400,000 units next year. The product normally sells for $80 each. A customer has offered to buy 60,000 units for $60 each. The customer will pay the transportation charge on the units purchased. If Orca accepts the special order, the effect on operating profits would be a:

• A) $120,000 increase.
• B) $360,000 increase.
• C) $840,000 increase.
• D) $1,200,000 decrease.

---

Definitions:

Kindergarten

An educational approach or institution for young children typically aged 4-6 years, focusing on introducing basic skills and social behavior prior to starting elementary school.

Actual

Pertains to what is real, factually existing, or currently happening as opposed to what is theoretical or possible.

Situational

Relating to or dependent upon the specific circumstances or context of an event or situation.

Anticipatory Grief

The grief experienced prior to a foreseeable loss, often involving the mourning of future events and changes that the loss will bring.