Baden Company Manufactures a Product with a Unit Variable Cost

question 29

Multiple Choice

Baden Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 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 $8,000.
• B) Income would increase by $8,000.
• C) Income would increase by $140,000.
• D) Income would increase by $40,000.

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Definitions:

Loanable Funds

The total supply of money available for borrowing or spending in the economy, including savings and investments.

Medicare

A federal health insurance program in the United States for people aged 65 and older, and for some younger people with disabilities.

Loanable Funds

The funds available for borrowing in the financial markets, determined by the savings of households and institutions.

Interest Rates

The cost of borrowing money or the return on savings, typically expressed as a percentage of the principal amount annually.