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.

---

Definitions:

Beginning Inventory

The value of a company's inventory at the start of an accounting period before any purchases or sales have been made.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.

Cost of Goods Sold

The immediate expenses linked to the creation of goods sold by a business, which encompass costs for materials and labor.

Specific Identification

An inventory valuation method that tracks the cost of individual items for the purpose of determining cost of goods sold.