The Nightingale Corp

question 122

Multiple Choice

The Nightingale Corp. makes and sells 200,000 chairs each year. The total fixed costs are $10,000,000. Its variable costs are: labor of $60 per chair; direct materials of $200 per chair; and variable overhead of $40 per chair. It normally sells its chairs at $500 per chair. 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 chairs for $310 each?

• A) Profits would decrease by $4,000,000
• B) Profits would be unaffected
• C) Profits would increase by $1,000,000
• D) Profits would increase by $4,000,000

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