Variations Company Had the Following Results of Operations for the Past

question 144

Essay

Variations Company had the following results of operations for the past year:
$$\begin{array} { l | l } \text { Sales (8,000 units at \$7.00) } & \$ 56,000 \\\hline \text { Variable manufacturing costs } & ( 30,000 ) \\\hline \text { Fixed manufacturing costs } & ( 6,000 ) \\\hline \text { Fixed selling and adrinistrative expenses } & ( 4,500 ) \\\hline \text { Operating income } & \$ 15,500 \\\hline\end{array}$$ A foreign company (whose sales will not affect Variations' regular sales) offers to buy 700 units at
$4.00 per unit. In addition to variable manufacturing costs, there would be an export cost of $0.30 per unit. Prepare an analysis of this additional business to show whether Variations should take this order.

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Definitions:

Avoidable Losses

Losses that could have been prevented through reasonable care or alternative actions.

Waiver

The voluntary relinquishment or surrender of a known right or privilege.

Relinquishment

Relinquishment involves voluntarily giving up or surrendering a right, position, or claim, often in a legal or formal context.

Contract

A legally enforceable agreement between two or more parties that creates mutual obligations.