Preston Company Manufactures a Product with a Unit Variable Cost

question 46

Multiple Choice

Preston Company manufactures a product with a unit variable cost of $140 and a unit sales price of $264. Fixed manufacturing costs were $720000 when 10000 units were produced and sold. The company has a one-time opportunity to sell an additional 3000 units at $210 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units acceptance of the special order would affect net income as follows:

• A) Income would decrease by $162000.
• B) Income would increase by $156000.
• C) Income would increase by $6000.
• D) Income would increase by $210000.

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Definitions:

Significance Level

The threshold used in hypothesis testing to determine whether to reject the null hypothesis, commonly denoted as alpha (α).

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A method used to separate solid particles from a liquid or gas by passing it through a filter medium that allows only the fluid to pass through.

Water Softener

A device or system used to remove minerals that cause hardness in water, typically involving the exchange of calcium and magnesium ions with sodium or potassium ions.