Exhibit 7-2 Jake Company Is Considering a Special Order for 5,000 Units

question 18

Multiple Choice

Exhibit 7-2
Jake Company is considering a special order for 5,000 units at a price of $60 per unit.Jake's product normally sells for $84 per unit and has variable manufacturing costs of $45 per unit and variable selling costs of $9 per unit.Fixed manufacturing costs are $150,000 and fixed selling and administrative costs are $300,000.Jake has capacity to produce 30,000 units and is currently producing 20,000 units.If the order is accepted,,Jake will incur legal fees of $7,500 in connection with the order,but there will be no variable selling costs on the special order.
-Refer to Exhibit 7-2.What are the differential revenues associated with the special order?

• A)$75,000
• B)$120,000
• C)$420,000
• D)$300,000
• E)None of the answer choices is correct.

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Definitions:

Production Line

A manufacturing process where parts or components are added successively in a specific sequence to create a finished product efficiently.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, often denoted by alpha.

Proportion

A part, share, or number considered in comparative relation to a whole; a ratio.

Inference

The process of drawing conclusions about a population based on data from a sample.