Widget Inc

question 135

Multiple Choice

Widget Inc. manufactures widgets. The company has the capacity to produce 100,000 widgets per year, but it currently produces and sells 75,000 widgets per year. The following information relates to current production: If a special sales order is accepted for 2800 widgets at a price of $36 per unit, fixed costs increase by $9000, and variable marketing and administrative costs for that order are $3 per unit, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

• A)Increase by $28,000
• B)Decrease by $19,000
• C)Increase by $19,000
• D)Increase by $27,400

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Definitions:

Usage of Trade

Customary practices and standards within a particular industry or market that are considered legally binding in commercial transactions.

Exclusive Remedy

A sole solution or legal recourse available to a party under a contract in the event of a breach, often limiting other forms of legal action.

Remedies Agreed Upon

Refers to solutions or compensations for breach of contract that both parties have consented to in advance.

Essential Purpose

The fundamental intent or main objective behind a legal document or agreement.