Classic Loungers Is in the Process of Preparing a Production

question 84

Multiple Choice

Classic Loungers is in the process of preparing a production cost budget for August. Actual costs in July for 200 chaise lounge chairs were: $\begin{array}{lr}\text { Materials cost } & \$ 6,000 \\\text { Labor cost } & 8,000 \\\text { Rent } & 2,000 \\\text { Depreciation } & 4,000 \\\text { Other fixed costs } & 5,000 \\\text { Total } & \$ 25,000\end{array}$ Each chair is sold for $140 in July. The company plans to lower the selling price to $130 per chair at which management estimates that sales will increase to 230 chairs. Materials and labor are the only variable costs. How much is the incremental revenue associated with the price reduction?

• A) $200
• B) $2,100
• C) $3,750
• D) $1,900

---

Definitions:

By-products

Materials produced as a residual or secondary product during the manufacturing process or chemical reactions.

Nicotine

A stimulant and addictive substance found in tobacco, which affects the nervous system when consumed.

Addictive

Characterized by a compulsive need to engage in a particular activity or consume a substance, leading to significant physiological or psychological dependence.

Marijuana

A plant-based substance containing psychoactive chemicals, commonly used for its relaxing and euphoric effects.