The Molly Corp

question 100

Multiple Choice

The Molly Corp. makes and sells 400,000 desks each year. The total fixed costs are $40,000,000. Its variable costs are: labor of $90 per desk; direct materials of $300 per desk; and variable overhead of $60 per desk. It normally sells its desks at $600 each. Assuming that it does not have a capacity problem, what would be the effect on its profits if it accepted a special order to make an additional 100,000 desks for $400 each?

• A) Profits would decrease by $15,000,000
• B) Profits would decrease by $5,000,000
• C) Profits would increase by $1,000,000
• D) Profits would increase by $5,000,000

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Definitions:

Concrete Operational Reasoning

A stage in Piaget's theory of cognitive development where children aged 7 to 11 begin to think logically about concrete events but have difficulty understanding abstract or hypothetical concepts.

Comprehension

The ability to understand and grasp the meaning of spoken or written language and concepts.

Vocabulary

The collection of words that a person knows and utilizes in a specific language.

Pragmatics

The study of how context influences the interpretation of meaning in language, including assumptions, implications, and social rules of communication.