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:

External Forces

External forces refer to outside influences that affect an organization, market, or environment, such as economic conditions, legal policies, and social trends.

Economic Landscape

The overall condition and characteristics of the economy at a certain time, including factors like GDP growth, unemployment rates, and inflation.

Government Policy

Decisions, plans, and actions that are undertaken by a government to achieve specific goals within a society.

Computerized Inventory

The use of computer systems and software to track and manage inventory levels, orders, sales, and deliveries.