Assuming There Is Excess Capacity, What Would Be the Effect

question 56

Multiple Choice

Assuming there is excess capacity, what would be the effect of accepting a special order for 2,000 units at a price of $64.00 per phone?

• A) Net income would decrease by $32,000.
• B) Net income would increase by $640,000.
• C) Net income would increase by $12,000.
• D) Net income would increase by $36,000.

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Definitions:

Budgeted Net Income

The estimated net income a company expects to earn over a specific period, as outlined in its budget.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, often used to assess whether a company has sufficient cash to fulfill its operations and obligations.

Budgeted Disbursements

Planned cash outflows for a specific period, including expenses, investments, and other payments.

Desired Balance

The targeted amount of money or level of assets an individual or organization aims to maintain.