Reference: 08-14
Wright Corporation's Contribution Format Income Statement for Last

question 112

Multiple Choice

Reference: 08-14
Wright Corporation's contribution format income statement for last month appears below. $$\begin{array} { | l | c | } \hline \text { Sales } & \$ 45,000 \\\hline \text { Less variable expenses } & 27,000 \\\hline \text { Contribution margin } & 18,000 \\\hline \text { Less fixed expenses } & 12,000 \\\hline \text { Net income } & \$ 6,000 \\\hline\end{array}$$ There were no beginning or ending inventories. The company produced and sold 3,000 units during the month.
-The company has an opportunity to secure a special order of 800 units if it is willing to drop the selling price on these units to $13. Costs of securing the special order would be $1,000. The special order would not affect the company's regular sales. If the special order is accepted, the company's overall net income will:

• A)remain the same.
• B)increase $3,800.
• C)increase $3,200.
• D)increase $2,200.

---

Definitions:

Variable Expenses

Expenses that fluctuate in direct proportion to the amount of production or the volume of sales, including items like direct labor and raw materials.

Contribution Margin

The amount by which the sale of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.

Break-Even

The point at which total costs and total revenues are equal, meaning no net loss or gain, and the business is just covering all its expenses.

Fixed Expenses

Costs that remain constant for a given period regardless of the level of production or sales volume.