Meco Company Produces a Product That Has a Regular Selling

question 83

Multiple Choice

Meco Company produces a product that has a regular selling price of $360 per unit. At a typical monthly production volume of 2,000 units, the product's average unit cost of goods sold amounts to $270. Included in this average is $120,000 of fixed manufacturing costs. All selling and administrative costs are fixed and amount to $30,000 per month. Meco Company has just received a special order for 1,000 units at $240 per unit. The buyer will pay transportation, and the regular selling price will not be affected if Meco accepts the order.
Assuming Meco Company has excess capacity, the effect on profits of accepting the order would be

• A) $60,000 increase.
• B) $60,000 decrease.
• C) $30,000 increase.
• D) $30,000 decrease.

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Definitions:

Median

The middle value in a data set, which divides the distribution into two equal parts, ensuring that half of the data points are below it and half are above.

Test Statistic

A statistic calculated from sample data that is used to assess the truth of a hypothesis in statistical testing.

Null Hypothesis

A presumption that implies no relationship or effect between variables or conditions in the scenario being tested.

Sample Mean

The average value of a set of observations or data points, calculated by summing all the observations and dividing by the number of observations.