Widget Inc

question 264

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 7000 widgets at a price of $41 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

• A)Decrease by $42,000
• B)Increase by $42,000
• C)Increase by $287,000
• D)Increase by $2,200,000

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Definitions:

Specific Product

A product distinguished by its unique characteristics or identified for a particular use or market.

Inelastic Demand

A situation in which the demand for a product does not significantly change in response to price changes, often because there are few or no substitutes available.

Antidrug Policy

Government or organizational policies aimed at reducing the production, distribution, and consumption of illegal drugs.

Street Crime

Refers to criminal acts that occur in public places such as theft, vandalism, assault, and robbery.