The Following Information Relates to Current Production of Outdoor Chaise

question 16

Multiple Choice

The following information relates to current production of outdoor chaise lounges at Backyard Posh: The regular selling price per chaise lounge is $300.00. The company is analyzing the opportunity to accept a special sales order for 500 chaise lounges at a price of $200.00 per unit. Variable marketing and administrative costs would be $10 per unit lower than on regular sales. Fixed costs would increase by $15,000. The company has the capacity to produce 15,000 chaise lounges per year, but is currently producing and selling 10,000 chaise lounges per year. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected?

• A)Decrease by $39,000
• B)Decrease by $24,000
• C)Increase by $39,000
• D)Increase by $24,000

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Definitions:

Little Albert

A landmark experiment in psychology conducted by John B. Watson which demonstrated that emotional reactions could be classically conditioned in humans.

Vicarious Conditioning

Learning that occurs by observing the reactions of others to an environment, rather than through direct experience or participation.

Emotional Responses

The reactions, both physiological and psychological, of an individual to external or internal stimuli.

Stimulus Generalization

The tendency to respond to stimuli that are similar, but not identical, to a conditioned stimulus in the process of learning.