Bulger Corporation Has Been Producing and Selling 40,000 Hats a Year

question 173

Multiple Choice

Bulger Corporation has been producing and selling 40,000 hats a year. The Bulger Corporation has the capacity to produce 50,000 hats with its present facilities. The following information is also available: $$\begin{array} { l l } \text { Selling price per unit } & \$ 30 \\\text { Variable costs per unit: } & \\\text { Manufacturing } & 11 \\\text { Selling and A dminis trative } & 5 \\\text { Fixed costs in total: } & \\\text { Manufacturing } & \$ 128,000 \\\text { Selling and A dminis trative } & 56,000\end{array}$$ If a special order is accepted for 10,000 hats at a price of $25 per unit, net income would:

• A) decrease by $24,000
• B) decrease by $140,000
• C) increase by $90,000
• D) increase by $250,000

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Definitions:

Nonpersonal Selling

Consists of advertising, sales promotion, direct marketing, and public relations.

Advertising

Paid nonpersonal communication usually targeted at large numbers of potential buyers.

Direct Mail

A marketing strategy involving the sending of advertisements or promotional materials directly to potential customers via postal mail.

Sales Communication

The process of exchanging information and messages between a seller and potential or existing customers to facilitate the selling process.