Wade Company Is Operating at 75% of Its Manufacturing Capacity

question 113

Multiple Choice

Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available: $$\begin{array} { | l | r | r | } \hline \text { Costs at } 75 \% \text { capacity: } & \text { Per Unit } & { \text { Total } } \\\hline \text { Direct materials } & \$ 12.00 & \$ 1,260,000 \\\hline \text { Direct labor } & 9.00 & 945,000 \\\hline \text { Overhead (fixed and variable) } & \underline { 15.00 } & \underline { 1,575,000 } \\\hline \text { Totals } & \$ 36.00 & \$ 3,780,000 \\\hline\end{array}$$ In producing 20,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred. What is the effect on income if Wade accepts this order?

• A) Income will decrease by $4 per unit.
• B) Income will increase by $4 per unit.
• C) Income will increase by $5 per unit.
• D) Income will decrease by $5 per unit.
• E) Income will increase by $11 per unit.

---

Definitions:

Progressive Presidents

Leaders of the United States who advocated for reforms and policies aimed at addressing social injustices, economic inequality, and fostering government efficiency and integrity.

Legislation

Laws or statutes enacted by a legislative body through a formal process of discussion, amendment, and approval.

Women Activists

Individuals identifying as women who actively campaign for social, political, environmental, or economic change.

Progressive Discourse

A type of conversation and rhetoric that aims at promoting social reforms and progressive ideas, advocating for change and improvement in societal structures.