Optus Company Makes Special Equipment Used in Mobile Network Towers

question 63

Multiple Choice

Optus Company makes special equipment used in mobile network towers.Each unit sells for $410.Optus produces and sells 12,500 units per year.They have provided the following income statement data:

A foreign company has offered to buy 75 units for a reduced price of $320 per unit.The marketing manager says the sale will not negatively affect the company's regular sales.The sales manager says that this sale will require incremental selling & administrative costs,as it is a one-time deal.The production manager reports that it would require an additional $25,000 of fixed manufacturing costs to accommodate the specifications of the buyer.If Optus accepts the deal,how will this impact operating profit?

• A) operating profit will increase by $9400.
• B) operating profit will decrease by $15,600.
• C) operating profit will increase by $24,000.
• D) operating profit will decrease by $9400.

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Definitions:

Periodic Inventory System

An inventory accounting system where inventory counts and cost of goods sold calculations are made at set intervals, such as monthly or yearly.

Gross Method

An accounting practice where purchases are recorded at their full invoice amount without deducting any cash discounts.

General Journal Entries

The recordings of financial transactions in the general journal, including both the debit and credit sides of each transaction.

Gross Margin Ratio

Gross margin ratio is a financial metric that measures a company's gross profit relative to its sales revenue, indicating the efficiency of production and pricing strategies.