Termus Industries Is Operating at 85% of Its Manufacturing Capacity

question 125

Multiple Choice

Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product units per year.A customer has offered to buy an additional 4,000 units at $25 each and sell them outside the country so as not to compete with Termus.The following data are available:
$$\begin{array} { l r r } \text { Costs at 85\%/ capacity: } &{ \text { Per } } & \\& \text { Unit } & \text { Total } \\\text { Direct materials } & \$ 10.00 & \$ 425,000 \\\text { Direct labor } & 8.00 & 340,000 \\\text { Overhead (fixed ard variable) } & 13.00 & 552,500 \\\text { Totals } & \$ 31.00 & \$ 1,317,500\end{array}$$
In producing 4,000 additional units,fixed overhead costs would remain at their current level but incremental variable overhead costs of $4 per unit would be incurred.What is the effect on income if Termus accepts this order?

• A) Income will decrease by $6 per unit.
• B) Income will increase by $6 per unit.
• C) Income will increase by $7 per unit.
• D) Income will decrease by $3 per unit.
• E) Income will increase by $3 per unit.

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Definitions:

Blood Administration

The process of transfusing blood or blood products into an individual's circulatory system.

Volume Control Burette Device

A medical device used to deliver a fixed volume of IV fluid at a predetermined rate, usually equipped with a chamber that can be filled with a precise volume of fluid.

IVPB

Intravenous piggyback, a method of delivering medication through an IV where a secondary medication bag is connected.