Benjamin Company Had the Following Results of Operations for the Past

question 64

Multiple Choice

Benjamin Company had the following results of operations for the past year: $$\begin{array} { l r l r } \text { Sales } ( 16,000 \text { units at } \$ 10 ) & & \$ 160,000 \\\text { Direct materials and direct labor } & \$ 96,000 & \\\text { Overhead (20\% variable) } & 16,000 & \\\text { Selling and administrative expenses (all fixed) } & 32,000 & ( 144,000 ) \\\hline \text { Operating income } & & \$ 16,000 \\\hline \end{array}$$
A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,000 units at $7.50 per unit.In addition to variable manufacturing costs,selling these units would increase fixed overhead by $600 and selling and administrative costs by $300.Assuming Benjamin has excess capacity and accepts the offer,its profits will:

• A)Increase by $30,000.
• B)Increase by $6,000.
• C)Decrease by $6,000.
• D)Increase by $5,200.
• E)Increase by $4,300.

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