A Company Is Currently Operating at 75% Capacity and Producing

question 111

Multiple Choice

A company is currently operating at 75% capacity and producing 3,000 units.Current cost information relating to this production is shown in the table below:
$$\begin{array} { | l | c | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 43 \\\hline \text { Direct material } & \$ 7 \\\hline \text { Direct labor } & \$ 6 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 4 \\\hline \text { Fixed overhead } & \$ 4 \\\hline\end{array}$$
The company has been approached by a customer with a request for a 200-unit special.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

• A) Any amount over $43 per unit.
• B) Any amount over $17 per unit.
• C) Any amount over $21 per unit.
• D) Any amount over $13 per unit.
• E) Any amount over $22 per unit.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies where the investor has significant influence but not full control, typically between 20% and 50% ownership.

Dividends

Distributions of earnings given by a business to its shareholders, often as profit sharing.

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies, where the investment income is proportional to the equity held.

Dividends

Distributions issued by a company to its shareholders, typically originating from the firm's earnings.