Helmsman Products Sells a Special Type of Navigation Equipment for $1300.Variable

question 171

Multiple Choice

Helmsman Products sells a special type of navigation equipment for $1300.Variable costs are $800 per unit.When a special order arrived from a foreign contractor to buy 44 units at a reduced sales price of $900 per unit,there was a discussion among the managers.The controller said that as long as the special price was greater than the variable costs,the sale would contribute to the company's profits and should be accepted as offered.The vice president,however,decided to decline the order.Which of the following statements supports the decision of the vice president?

• A)The order is not likely to affect the regular sales.
• B)The company is operating at 70% of its production capacity.
• C)The variable costs of $800 include variable costs of packing the product.
• D)The company will need to hire additional staff to execute this order.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders from its profits in the form of cash.

Prepaid Expenses

Costs paid for in advance of receiving the benefit of the service or product, such as insurance premiums or rent, which are recorded as assets until used.

Income Taxes Payable

The amount of income taxes a company or individual owes to the government, which has not yet been paid.

Statement Of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.