Wade Company Is Operating at 75% of Its Manufacturing Capacity

question 134

Multiple Choice

Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year.A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade.The following data are available: $\begin{array}{lrr}\text { Costs at 75\% capacity: } & \text { Per Unit } & \text { Total } \\\text { Direct materials } & \$ 12.00 & \$ 1,260,000 \\\text { Direct labor } & 9.00 & 945,000 \\\text { Overhead (fixed and variable) } & 15.00 & 1,575,000 \\\text { Totals } & \$ 36.00 & \$ 3,780,000 \\\hline \hline\end{array}$ In producing 20,000 additional units,fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred.What is the effect on income if Wade accepts this order?

• A)Income will decrease by $4 per unit.
• B)Income will increase by $4 per unit.
• C)Income will increase by $5 per unit.
• D)Income will decrease by $5 per unit.
• E)Income will increase by $11 per unit.

---

Definitions:

Mission Statement

An official outline of the objectives and beliefs of a corporation, institution, or person.

Planning Process

A systematic approach to defining goals, developing strategies, and outlining tasks and schedules to achieve the desired objectives.

Monitoring Performance

The process of observing and measuring an activity or tasks to ensure that they are being accomplished as planned and correcting any deviations.

Management By Objectives (MBO)

A performance management approach where managers and employees work together to set, record, and monitor goals for a specific period, aiming for organizational alignment and performance enhancement.