Cinotti Bread Depot Bakes and Sells Each Bagel for $1

question 4

Multiple Choice

Cinotti Bread Depot bakes and sells each bagel for $1.25.The cost of producing 600,000 bagels in the prior year was: $$\begin{array} { c r } \text { Revenues } & \$ 750,000 \\\text { Direct materials } & 330,000 \\\text { Direct labor } & 66,000 \\\text { Manufacturing overhead - fixed } & 132,000 \\\text { Manufacturing overhead - variable }& 84,000 &\end{array}$$ At the start of the current year, Cinotti received a special order for 15,000 bagels to be sold for $1.10 per bagel.The company estimates it will incur an additional $700 in total fixed costs in order to lease a special machine needed to bake the bagels in the customer's logo shape.Also, this order will not affect any of its other operations.Should the company accept the special order?

• A)No, profit will decrease by $2,950
• B)No, profit will decrease by $2,250
• C)Yes, profit will increase by $3,800
• D)Yes, profit will increase by $500

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