Each Month Fig Company Produces 11,000 Units of a Product

question 77

Multiple Choice

Each month Fig Company produces 11,000 units of a product that sells for $18 per unit, and has variable costs of $12 per unit.Total fixed costs for the month are $77,000.A special order is received for 5,000 units at a price of $14 per unit.Fig Company has adequate capacity for the special order.Relevant to the decision of whether to accept or reject this special order is the _____.

• A)difference between the offered price and the variable cost per unit
• B)difference between the current fixed cost per unit and the expected fixed cost per unit
• C)difference between the current sales price and the proposed sales price
• D)all of these answers are correct

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Definitions:

Variable Costing

A pricing approach that incorporates only variable production expenses—such as direct materials, direct labor, and variable manufacturing overhead—into the cost of products.

Absorption Costing

A costing method that assigns all manufacturing costs, both fixed and variable, to products.

Net Income

The total earnings of a company after subtracting all expenses from revenue.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a product.