Ratzlaff Company Has a Current Production Level of 20,000 Units

question 162

Multiple Choice

Ratzlaff Company has a current production level of 20,000 units per month.Unit costs at this level are: $$\begin{array} { l r } \text { Direct materials } & \$ 0.25 \\\text { Direct labor } & 0.40 \\\text { Variable overhead } & 0.15 \\\text { Fixed overhead } & 0.20 \\\text { Marketing - fixed } & 0.20 \\\text { Marketing/distribution - variable } & 0.40\end{array}$$ Current monthly sales are 18,000 units.Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each.Current sales would NOT be affected by the one-time-only special order,and variable marketing/distribution costs would NOT be incurred on the special order.What is Ratzlaff Company's change in operating profits if the special order is accepted?

• A) $400 increase in operating profits
• B) $400 decrease in operating profits
• C) $1,800 increase in operating profits
• D) $1,800 decrease in operating profits

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