Helmsman Products Sells a Special Type of Navigation Equipment for $1200.Variable

question 180

Multiple Choice

Helmsman Products sells a special type of navigation equipment for $1200.Variable costs are $800 per unit.When a special order arrived from a foreign contractor to buy 44 units at a reduced sales price of $1000 per unit,there was a discussion among the managers.The controller said that as long as the special price was greater than the variable costs,the sale would contribute to the company's profits and should be accepted as offered.The vice president,however,decided to decline the order.Which of the following statements supports the decision of the vice president?

• A) The order is not likely to affect the regular sales.
• B) The company is operating at 70% of its production capacity.
• C) The variable costs of $800 includes variable costs of packing the product.
• D) The company will need to hire additional staff to execute this order.

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Definitions:

Profit-Maximizing Output

The level of production at which a company achieves the highest possible profit margin, given its costs and market demand.

Wage Rate

The amount of money paid to an employee per unit of time, which can be hourly, daily, or annually.

Total Product

The overall amount of products made by a company within a specific timeframe.

Marginal Product

The additional output produced by using one more unit of a variable input, holding other inputs constant.