The Following Information Relates to a Product Produced by Creamer

question 13

Multiple Choice

The following information relates to a product produced by Creamer Company: $\begin{array}{lr}\text { Direct materials } & \$ 24 \\\text { Direct labour } & 15 \\\text { Variable overhead } & 30 \\\text { Fined overhead } & 18 \\\text { Unit cost } & \$ 87\end{array}$ Fixed selling costs are $500,000 per year,and variable selling costs are $12 per unit sold.Although production capacity is 600,000 units per year,the company expects to produce only 400,000 units next year.The product normally sells for $120 each.A customer has offered to buy 60,000 units for $90 each. What is the incremental cost per unit associated with the special order?

• A) $64
• B) $69
• C) $81
• D) $84

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Definitions:

Rational Expectations Theory

A principle that asserts that outcomes will not systematically deviate from what people expected them to be, because individuals use all available information to make forecasts.

Fed

Short for the Federal Reserve System, it's the central banking system of the United States responsible for monetary policy.

Discretionary Fiscal

Fiscal policies involving government spending and taxation that are at the discretion of the government and are used to influence the economy.

Economic Stabilization

Actions by governments or central banks to maintain economic growth, control inflation, and reduce unemployment.