Samson Incorporated Provided the Following Information Regarding Its Only Product

question 98

Multiple Choice

Samson Incorporated provided the following information regarding its only product: Assuming there is excess capacity, what would be the effect on operating income of accepting a special order for 1,200 units at a sale price of $47 per product? The 1,200 units would not require any variable selling and administrative expenses. (NOTE: Assume regular sales are not affected by the special order.)

• A)Increase by $84,300
• B)Decrease by $28,500
• C)Increase by $24,300
• D)Increase by $28,500

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Definitions:

Guaranty Contract

A legal agreement where a guarantor agrees to fulfill the financial obligations of a debtor to a lender, in case the debtor fails to do so.

Suretyship Contract

An agreement whereby a party (surety) guarantees the performance of an obligation by another party (principal) to a third party (obligee).

Primarily Liable

The main party responsible for fulfilling an obligation or settling a debt in legal or financial contexts.

Secondarily Liable

Refers to a party who is indirectly responsible for a debt or obligation, where primary liability lies with another party, but the secondary party may be called upon to fulfill the obligation if the primary fails to do so.