Walton Company Manufactures a Product with the Following Costs Per

question 153

Multiple Choice

Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: The company has the capacity to produce 90,000 units. The product regularly sells for $120. A wholesaler has offered to pay $110 per unit for 7,500 units. If the special order is accepted, the effect on operating income would be a

• A) $75,000 decrease.
• B) $429,000 increase.
• C) $495,000 increase.
• D) $249,000 increase.

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Definitions:

Consolidated Balance Sheet

A financial statement that aggregates the assets, liabilities, and equity of a parent company and its subsidiaries into one document to present the financial position of the entire group as a single entity.

Goodwill

An intangible asset arising from the acquisition of one entity by another, representing the premium paid over the fair value of the identifiable net assets.

Contingent Consideration

Payment in an acquisition that is dependent on specific future events possibly occurring, such as meeting performance targets.

Contingent Consideration

An additional payment that the buyer agrees to make to the seller in a business acquisition, which is dependent on specific future events or performances.