Kansas Company Produces and Sells 20,000 Units at $22 Per

question 97

Multiple Choice

Kansas Company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows: $$\begin{array} { l l } \text { Variable-unit-based costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 2 \text { per unit } \\\text { Set-up costs } & \$ 3 \text { per unit } \\& \$ 15 \text { per unit }\end{array}$$ A total of 500 set-ups at a cost of $120 per set-up are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available, but these 5,000 would require 60 set-ups.If Kansas Company accepts the special order, Kansas Company's cost will increase by _____.

• A)$7,200
• B)$40,000
• C)$57,200
• D)$65,000

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Definitions:

Monopolistic Competition

A market structure characterized by many producers selling products that are similar but not identical, leading to competition based on price, quality, and innovation.

Market Share

The share of the market held by a specific company or product, typically represented as a percentage of the overall sales in that industry.

Oligopoly

A market structure characterized by a small number of firms that control a large majority of the market share, often leading to limited competition.

Pure Monopoly

A pure monopoly is a market structure where a single seller controls the entire supply of a product or service, and where the entry of new competitors is completely blocked.