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.

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Definitions:

Population Growth

The increase in the number of individuals in a population, measured by the natural increase and net migration.

Per Capita Incomes

The average income earned per person in a certain area or country, calculated by dividing the area's total income by its population.

Birth Rates

The average number of births per 1,000 people in a given population during a specific period of time.

Demographic Transition

The transition from high birth and death rates to lower birth and death rates as a country or region develops from a pre-industrial to an industrialized economic system.