Benjamin Company Had the Following Results of Operations for the Past

question 78

Multiple Choice

Benjamin Company had the following results of operations for the past year: $$\begin{array} { | l | r | r | } \hline \text { Sales } ( 16,000 \text { units at } \$ 10 ) & & \$ 160,000 \\\hline \text { Direct materials and direct labor } & \$ 96,000 & \\\hline \text { Overhead ( } 20 \% \text { variable) } & 16,000 & \\\hline \text { Selling and administrative expenses (all fixed) } & \underline { 32,000 } & \underline { ( 144,000 ) } \\\hline \text { Operating income } & & \underline { \$ 16,000 }\\\hline\end{array}$$ A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300. Assuming Benjamin has excess capacity and accepts the offer, its profits will:

• A) Increase by $30,000.
• B) Increase by $6,000.
• C) Decrease by $6,000.
• D) Increase by $5,200.
• E) Increase by $4,300.

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Definitions:

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An electrical measurement expressing the potential difference between two points in a circuit, typically driving current flow.

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A type of electric motor that operates on the principle of electromagnetic induction, where the rotation of the motor is caused without direct electrical connection to the rotor.

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A system used to control the speed of an electric motor by varying the frequency and voltage supplied to the electric device.