Markson Company Had the Following Results of Operations for the Past

question 126

Multiple Choice

Markson Company had the following results of operations for the past year: $\begin{array} { | l | l | l | } \hline \text { Sales } ( 8,000 \text { units at } \$ 20 ) & \$ 160,000 & \\\hline \text { Variable manufacturing costs } & \$ 86,000 & \\\hline \text { Fixed manufacturing costs } & 15,000 & \\\hline \text { Variable selling and administrative expenses } & 12,000 & \\\hline \text { Fixed selling and administrative expenses } & 20,000 & ( 133,000 ) \\\hline \text { Operating income } & & \$ 27,000 \\\hline\end{array}$
A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $14 per unit. In addition to existing costs, selling these units would increase fixed overhead by $1,600 for the purchase of special tools. Markson's annual productive capacity is 12,000 units. If Markson accepts this additional business, its profits will:

• A) Decrease by $1,600.
• B) Increase by $1,900.
• C) Decrease by $5,100.
• D) Decrease by $5,650.
• E) Increase by $3,500.

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Definitions:

Substitute Resources

Alternate resources or inputs that can be used in place of one another in the production process, often leading to competition between them.

Skilled Craft Workers

Individuals who are trained to perform specialized tasks or crafts, often requiring manual prowess and specific training.

Industrial Unions

Labor unions organizing all workers in an industry under one association, no matter the job each worker performs.

Craft Unions

Labor unions that represent workers specialized in particular crafts or trades, focusing on skills and qualifications rather than the industry or sector.