The Manager at the Plymouth Manufacturing Company Reported a Current

question 39

Multiple Choice

The manager at the Plymouth Manufacturing Company reported a current production level of 22,000 units per month.The managerial accountant reported the following unit-level costs:

The manager reported monthly sales of 20,000 units.The Salem Company contacted the manager at Plymouth Manufacturing and inquired about the purchase of 1,525 units at $2.10 per unit.The manager noted that current sales would not be affected by the one-time-only special order,and variable marketing/distribution costs would not be incurred with the special order.What is the change in operating profits at Plymouth Manufacturing Company's if the special order is accepted?

• A)$1,525 decrease
• B)$1,525 increase
• C)$1,784.25 decrease
• D)$1,784.25 increase
• E)There is no change in operating profits

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Definitions:

Inverted-U Theory

A hypothesis suggesting the relationship between a certain factor and its effect follows an inverted U-shape, indicating optimal levels at the midpoint of the factor's intensity.

Industry Concentration

The extent to which a small number of firms dominate the total output, sales, or employment of an industry.

R&D Expenditures

Funds allocated towards research and development activities in order to innovate or improve products, processes, or services.

Diffusion

The process by which an innovation is communicated through certain channels over time among the members of a social system.