Lattimer Company Had the Following Results of Operations for the Past

question 127

Multiple Choice

Lattimer Company had the following results of operations for the past year: $$\begin{array} { l r r r } \text { Sales } ( 15,000 \text { units at } \$ 12 ) & & \$ 180,000 \\\text { Variable manufacturing costs } & \$ 97,500 & \\\text { Fixed manufacturing costs } & 21,000 & \\\text { Selling and administrative expenses (all fixed) } & 36,000 & ( 154,500 ) \\\hline \text { Operating income } & & \$ 25,500 \\\hline \hline\end{array}$$ A foreign company offers to buy 5,000 units at $7.50 per unit.In addition to existing costs,selling these units would add a $0.25 selling cost for export fees.Lattimer's annual production capacity is 25,000 units.If Lattimer accepts this additional business,the special order will yield a:

• A)$2,000 loss.
• B)$8,250 loss.
• C)$3,750 profit.
• D)$3,250 loss.
• E)$5,000 profit.

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Definitions:

Forward Exchange Rate

A predetermined price at which a currency transaction will occur at a future date.

Mexican Treasury

Refers to the governmental department responsible for issuing Mexican government securities, including bonds and treasury bills.

Spot Exchange Rate

The current market price for immediate exchange of currencies.

British Securities

Financial instruments issued in the United Kingdom, including stocks, bonds, and other investment vehicles.