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:

Public Companies

Companies whose shares are traded publicly on stock exchanges and are subject to regulatory oversight.

Independent Board

A corporate board of directors, the majority of whom are independent and not involved in the daily operations of the company, to ensure unbiased governance and decision-making.

PCAOB

The Public Company Accounting Oversight Board, a nonprofit corporation established by Congress to oversee the audits of public companies to protect investors.

Extraordinary Cooperation

A situation where an individual or organization goes above and beyond the standard expectations to work with others towards a common goal or in assisting in legal matters.