Snapper Tool Company Has a Production Capacity of 3,000 Units

question 159

Multiple Choice

Snapper Tool Company has a production capacity of 3,000 units per month, but current production is only 2,500 units.Total manufacturing costs are $60 per unit and marketing costs are $16 per unit.Doug Levy offers to purchase 500 units at $76 each for the next five months.Should Snapper accept the one-time-only special order if only absorption-costing data are available?

• A)Yes, good customer relations are essential.
• B)No, the company will only break even.
• C)No, since only the employees will benefit.
• D)Yes, since operating profits will most likely increase.
• E)Yes, because breaking even is better than having idle capacity.

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Definitions:

Volume of Sales

The total number of units of a product or service sold within a specific time frame, often used as an indicator of a company’s performance or consumer demand.

Corporations

Corporations are legal entities owned by shareholders, capable of entering into contracts, owning assets, and being held liable for debts, formed to engage in business activities.

Partnerships

An official form of business where management tasks and earnings are divided among two or more participants.

Legal Partnership

A formal arrangement by two or more parties to manage and operate a business and share its profits, which can have various forms such as general, limited, and limited liability partnerships.