Zildjian Corporation Manufactures a Single Product with the Following Unit

question 23

Multiple Choice

Zildjian Corporation manufactures a single product with the following unit costs for 1,250 units: $$\begin{array} { l r } \text { Direct materials } & \$ 2,300 \\\text { Direct labor } & 960 \\\text { Factory overhead } ( 30 \% \text { variable } ) & 1,800 \\\text { Selling expenses ( } 50 \% \text { variable) } & 900 \\\text { Administrative expenses (10\% variable) } & 840 \\\text { Total per unit } & \$ 6,800\end{array}$$ Recently, a company approached Zildjian Corporation about buying 100 units for $5,100 each. Currently, the models are sold to dealers for $7,900. Zildjian Corporation's capacity is sufficient to produce the extra 100 units. No additional selling expenses would be incurred on the special order.
What is the profit earned by Zildjian Corporation on the original 1,250 units?

• A)$6,800,000
• B)$7,875,000
• C)$2,750,000
• D)$1,375,000

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Definitions:

Competitive Products

Goods or services offered by different firms that compete in the same market space and aim to satisfy the same consumer needs.

Net Operating Cash Flow

The amount of cash generated by a company’s normal business operations, after accounting for operating expenses and working capital changes.

Capital Cost Allowance

A tax deduction available in many jurisdictions for businesses, representing a yearly allowance for the wear and tear, deterioration, or obsolescence of the property.

Tax Rate

The fraction of earnings upon which the government imposes taxes on a person or corporate entity.