It Costs Galiente Company $46 Per Unit ($27 Variable and $19

question 38

Multiple Choice

It costs Galiente Company $46 per unit ($27 variable and $19 fixed) to produce its product which normally sells for $58 per unit. A Brazilian wholesaler offers to purchase 5000 units at $36 each. Galiente would incur special shipping costs of $5 per unit if the order were accepted. Galiente has sufficient unused capacity to produce the 5000 units. If the special order is accepted what will be the effect on net income?

• A) $50000 decrease
• B) $20000 increase
• C) $15000 increase
• D) $35000 increase

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Definitions:

Allocation of Resources

The distribution of available resources, including land, labor, and capital, among various uses to maximize efficiency and effectiveness.

Foreign Demand

The desire and willingness of buyers in other countries to purchase goods and services from a particular nation.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specified period.

Motorcycle Imports

Refers to the bringing in of motorcycles from foreign countries into a domestic market usually subject to tariffs, quotas, and regulations.