Walton Company Manufactures a Product with the Following Costs Per

question 31

Multiple Choice

Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: $\begin{array}{llr} \text { Direct materials} &\$12\\ \text { Direct labour } &36\\ \text { Variable manufacturing overhead } &18\\ \text { Fixed manufacturing overhead } &24\\\end{array}$
The company has the capacity to produce 90,000 units.The product regularly sells for $120.
-A wholesaler has offered to pay $110 a unit for 7,500 units.
If the special order is accepted,what would be the effect on operating income?

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

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Definitions:

Geometric Average Return

The average rate of return on an investment per year, compounded annually, representing the compounded growth rate over time.

Yearly Return

The annual profit or loss generated by an investment, usually expressed as a percentage of the investment's initial value.

Information Ratio Measure

A performance metric used to evaluate the skill of an investment manager by comparing their returns relative to the risk taken.

Residual Standard Deviations

A measure of the amount of variance in a set of data points that is not explained by the predictive variables in a regression model.