Cornish Company Had the Following Results of Operations for the Past

question 88

Multiple Choice

Cornish Company had the following results of operations for the past year: $\begin{array}{|l|r|r|}\hline \text { Sales }(20,000 \text { units at } \$ 22) & & \$ 440,000 \\\hline \text { Direct materials and direct labor } & \$ 200,000 & \\\hline \text { Overhead (40\% variable) } & 100,000 & \\\hline \text { Selling and administrative expenses (all fixed) } & 92,000 & (392,000) \\\hline \text { Operating income } & & \$ 48,000 \\\hline\end{array}$
A foreign company (whose sales will not affect Cornish's market) offers to buy 3,000 units at $17.00 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Cornish accepts the offer, its profits will:

• A) Decrease by $4,500.
• B) Increase by $4,500.
• C) Decrease by $300.
• D) Increase by $13,500.
• E) Increase by $15,000.

---

Definitions:

Number of Assets

The total count of individual assets, both tangible and intangible, owned or controlled by an entity.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed funds and exchange traded funds.

Stocks and Bonds

Equity and debt securities respectively, representing ownership in a corporation and a loan to be repaid by an entity, often with interest.

5th Wheel

A pivoting plate attached to a vehicle's chassis (like those on semi-trucks) that enables the attachment and swivel motion of a trailer or similar component.