Tunnel Incorporated Provided the Following Information Regarding Its Single Product

question 88

Multiple Choice

Tunnel Incorporated provided the following information regarding its single product: The regular selling price for the product is $80. The annual quantity of units produced and sold is 40,000 units (the costs above relate to the 40,000 units production level) . The company has excess capacity and regular sales will not be affected by this special order. There was no beginning inventory.
What would be the effect on operating income of accepting a special order for 2500 units at a sale price of $54 per product assuming additional fixed manufacturing overhead costs of $15,000 are incurred? (Round any intermediary calculations to the nearest cent.)

• A)Decrease by $78,425
• B)Decrease by $63,425
• C)Increase by $63,425
• D)Increase by $78,425

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Definitions:

Behavioral Segmentation

The division of a market into groups based on consumer behaviors, such as purchasing habits or product usage.

Observable Actions

Behaviors or activities that can be seen and measured, often used in research to gather data on consumer habits or employee performance.

Benefits Sought

The specific advantages or positive outcomes that consumers desire when choosing among products or services.

Behavioral Segmentation

The process of dividing a market into groups based on consumer behaviors, such as purchase history, product usage, or decision-making patterns.