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

question 13

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 amount of additional profit or loss will be incurred if the order is accepted?

• A)$300,000
• B)$67,500
• C)($127,500)
• D)($22,500)
• E)None of the answer choices is correct.

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels during a period.

Planning Budget

A budget that outlines the expected revenues, expenses, and resource allocations over a specific period, used for strategic financial planning.

Spending Variance

The difference between the budgeted amount for spending and the actual amount spent.

Supplies Cost

The total expense incurred for supplies used during a specific period, encompassing raw materials or office supplies depending on the business context.