Chocolate Company Currently Has Excess Capacity Cost of Goods Sold Includes $20,000 of Fixed Manufacturing Cost

question 32

Multiple Choice

Chocolate Company currently has excess capacity. A special order for 5,000 units is received at a price of $13 per unit. Currently, production and sales are anticipated to be 20,000 units without considering the special order. Budget information for the current year follows. $\begin{array}{lccc} \text { Sales } & \$ 300,000 \\ \text { Less: Cost of goods sold } & \underline{ 160,000 } \\\text { Gross margin } & \underline{\$140,000 }\end{array}$
Cost of goods sold includes $20,000 of fixed manufacturing cost. If the special order is accepted, the company's income will:

• A)Increase by $30,000.
• B)Decrease by $30,000.
• C)Increase by $35,000.
• D)Decrease by $35,000.
• E)Increase by $65,000.

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Definitions:

Venous Drainage

The process by which blood is returned to the heart through veins after oxygen and nutrients have been delivered to tissues.

Superior Vena Cava

The superior vena cava is a large vein that carries deoxygenated blood from the upper half of the body to the heart.

Hemiazygos

A vein on the left side of the vertebral column that drains blood from the posterior walls of the thorax and abdomen into the azygos vein.

Posterior Thoracic

Pertaining to the back part of the chest area, which houses important components such as the lungs and heart.