Nebraska Company Produces and Sells 20,000 Units at $20 Per

question 49

Multiple Choice

Nebraska Company produces and sells 20,000 units at $20 per unit.Nebraska Company's product cost is calculated as follows: $$\begin{array} { l l } \text { Variable-unit-based costs } & \$ 8 \text { per unit } \\\text { Fixed costs } & \$ 2 \text { per unit } \\\text { Set-up costs } & \$ 3 \text { per unit } \\& \$ 13 \text { per unit }\end{array}$$ A total of 500 set-ups at a cost of $120 per set-up are required to produce the 20,000 units.Nebraska Company has received a special order to sell 5,000 units at $10 per unit.Nebraska Company has excess capacity available, but these 5,000 would require 60 set-ups.If Nebraska Company accepts the special order, Nebraska Company's net income will _____.

• A)decrease by $5,000
• B)increase by $20,000
• C)increase by $5,000
• D)increase by $2,800

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Definitions:

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A system of communication that uses symbols, such as words, sounds, and gestures, organized according to certain rules to convey information and express ideas.

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An opening designed to direct the flow of heated air into a room as part of a heating, ventilation, and air conditioning (HVAC) system.

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A glass designed specifically for serving juice; typically smaller than other beverage glasses.