Benjamin Company Had the Following Results of Operations for the Past

question 148

Multiple Choice

Benjamin Company had the following results of operations for the past year: $\begin{array}{llr} \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) \\ \text {Operating income } &&\$16,000\\\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 $4,300.
• B) Increase by $6,000.
• C) Decrease by $6,000.
• D) Increase by $30,000.
• E) Increase by $5,200.

---

Definitions:

Concept Testing

The process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reactions.

Late Majority

A category of consumers in the diffusion of innovation model who adopt a new product or technology after the average member of a society.

Beta Testing

The second phase of software testing in which a sample of the intended audience uses the product in a real environment to identify defects.

Market Testing

The process of evaluating the viability of a new product or service through controlled experimentation in a specific market segment before a full-scale launch.