Use the Following to Answer Questions

question 73

Multiple Choice

Use the following to answer questions
Knockdown Products normally sells boxing gloves for $85 a pair. Knockdown just received a special order for 1,500 pair at a price of $50 a pair. To purchase, store, and ship the gloves, it costs a total of $55 a pair, which consists of $43 in variable costs and $12 in fixed costs.
-Assuming Knockdown has no way of purchasing any additional gloves,and,that accepting this order will mean losing an equivalent quantity of sales to regular customers,Knockdown should:

• A)reject the offer since income will decrease by $7,500
• B)accept the offer since income will increase by $7,500
• C)reject the offer since income will decrease by $52,500
• D)accept the offer since income will increase by $52,500

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Definitions:

IRS Method

Techniques and guidelines set by the Internal Revenue Service for calculating and filing taxes.

Depreciation

The method of allocating the cost of a tangible or physical asset over its useful life.

Royalties

Payments made to owners of intellectual property, like patents or copyrights, in exchange for usage rights.

Form 1099-MISC

A document used to report miscellaneous income such as payments made to independent contractors, rent, or awards.