The Varone Company Makes a Single Product Called a Hom

question 136

Multiple Choice

The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per-unit costs to produce and sell one Hom at that activity level follow:
$\begin{array}{|l|r|}\hline \text { Direct Materials } & \$ 20 \\\hline \text { Direct Labour } & \$ 10 \\\hline \text { Variable Manufacturing Overhead } & \$ 5 \\\hline \text { Fixed Manufacturing Overhead } & \$ 7 \\\hline \text { Variable Selling Expense } & \$ 8 \\\hline \text { Fixed Selling Expense } & \$ 2 \\\hline\end{array}$ The regular selling price for one Hom is $60. A special order has been received at Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the regular selling price. If this special order is accepted, the variable selling expense will be reduced by 25%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $12,000, and Varone would have no use for it after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labour is a variable cost.
-If Varone can expect to sell 32,000 Homs next year through regular channels and the special order is accepted at 15% off the regular selling price,what would be the effect on operating income next year due to accepting this order?

• A) $24,000 decrease.
• B) $52,000 increase.
• C) $68,000 increase.
• D) $80,000 increase.

Identify which muscles contribute to specific movements such as walking on tiptoes or wearing a glove.

Identify and understand the constitutional amendments that provide procedural safeguards to persons accused of crimes.

Recognize traditional markets of organized crime.

Understand the principle of due process as guaranteed by the Fifth Amendment.

---

Definitions:

Elasticity of Demand

A measure of how sensitively the quantity demanded of a good responds to changes in other economic factors, such as price or consumer income.

Collusive Agreement

A secret or illegal cooperation or agreement between parties to limit competition and manipulate market conditions to their advantage.

Cartel

An association of independent businesses or countries that work together to control prices and limit competition in a specific market.

Collusion

An agreement between two or more parties, often covertly, to limit competition and manipulate markets for mutual benefit.