Use the Following to Answer Questions

question 75

Multiple Choice

Use the following to answer questions
Naui Industries produces flowered shirts which normally sell for $24 each. The total cost to manufacture each shirt is $17, which consists of $11 of variable costs and $6 of fixed costs. A hotel chain has approached Naui with a special order for 2,000 shirts at $15 each.
-Assuming Naui has sufficient excess capacity to fill this special order without affecting sales to current customers,it should:

• A)reject the offer since income will decrease by $8,000
• B)accept the offer since income will increase by $8,000
• C)reject the offer since income will decrease by $4,000
• D)accept the offer since income will increase by $4,000

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Definitions:

Revenue

The total amount of money generated by a company from its business activities, such as sales of goods or services, before any expenses are deducted.

Salaries Payable

A liability account that records the amounts of wages earned by employees that have not yet been paid to them.

Salaries Expense

An accounting item that represents the total amount paid to employees in the form of salaries over a specific period of time.

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.