Omark Corporation Currently Manufactures a Subassembly for Its Main Product

question 91

Multiple Choice

Omark Corporation currently manufactures a subassembly for its main product.The variable costs per unit are $48, in addition to a $6 charge based on estimated selling expenses.R-Corp has contacted Omark with an offer to sell them 5,000 of the subassemblies for $44.00 each.Omark will eliminate $50,000 of fixed overhead if it accepts the proposal.What is increase or decrease in profit from accepting the offer?

• A)$50,000 increase
• B)$100,000 increase
• C)$170,000 increase
• D)$50,000 decrease
• E)$70,000 increase

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Definitions:

Factors of Production

The inputs used in the production of goods or services, typically including land, labor, capital, and entrepreneurship.

Operating Budget

A detailed projection of all estimated income and expenses based on forecasted sales revenue during a given period, often one year.

Budgeted Financial Statements

Financial statements that project the financial position and performance of a company based on expected income, expenses, and cash flows.

Financial Results

The outcome of a company's operations and activities in terms of income, expenses, and profit over a specific period.