It Costs Dryer Company $26 Per Unit ($18 Variable and $8

question 42

Multiple Choice

It costs Dryer Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 5,000 units at $21 each. Dryer would incur special shipping costs of $2 per unit if the order were accepted. Dryer has sufficient unused capacity to produce the 5,000 units. If the special order is accepted, what will be the effect on net income?

• A) $5,000 decrease
• B) $5,000 increase
• C) $15,000 increase
• D) $90,000 increase

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Definitions:

Unfair

Acting in a manner that is unjust, biased, or not in accordance with the rules or standards.

Rectification

The legal process of correcting an error or omission in a document to reflect the true intention of the parties involved.

Comma

A punctuation mark indicating a pause between parts of a sentence or used to separate items in a list.

Freight Rebates

Discounts or refunds given by carriers or warehouse operators on freight charges under certain conditions.