Fleming Company Had the Following Results of Operations for the Past

question 92

Essay

Fleming Company had the following results of operations for the past year:
$$\begin{array} { l r } \text { sales } ( 10,000 \text { units at } \$ 6.80 ) & \$ 68,000 \\\text { Materials and direct labor } & ( 20,000 ) \\\text { Overhead (40\% variable) .......................... } & ( 10,000 ) \\\text { Selling and adruinistrative expenses (all fixed) } & ( 6,000 ) \\\text { Operating income } & \$ 32,000\end{array}$$ A foreign company (whose sales will not affect Fleming's regular sales)offers to buy 2,000 units at $5.00 per unit.In addition to variable manufacturing costs,there would be shipping costs of $1,200 in total on these units.Should Fleming take this order?
Explain.

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Definitions:

Cattle

Large domesticated bovines raised for their meat, milk, or hides, but in economic context, it broadly relates to agricultural commodities.

Opportunity Cost

The expense incurred by not selecting the second-best choice while deciding or preferring one option to another.

Cars

Motor vehicles with four wheels, primarily used for transporting people rather than goods.

Lumber

Wood that has been processed into beams and planks, a stage in the process of wood production.