Cornish Company Had the Following Results of Operations for the Past

question 81

Multiple Choice

Cornish Company had the following results of operations for the past year:
$\begin{array}{l}\text { Sales }(20,000 \text { units at } \$ 22) &&\$440,000 \\\text { Direct materials and cirect } 1 \text { abor } &\$ 200,000 \\\text { Overhead (40\% variable) } & 100,000\\ \text { Selling and administrative expenses (all fixed) } & 92,000&(392,000) \\\text { Operating income }&&\$48,000\end{array}$ A foreign company (whose sales will not affect Cornish's market) offers to buy 3,000 units at $17.00 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Cornish accepts the offer, its profits will:

• A) Increase by $13,500.
• B) Increase by $4,500.
• C) Decrease by $4,500.
• D) Increase by $15,000.
• E) Decrease by $300.

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