Pericloud Company Produces a Product That Has a Regular Selling

question 64

Multiple Choice

Pericloud Company produces a product that has a regular selling price of $500 per unit.At a typical monthly production volume of 4,000 units, the product's average unit cost of goods sold amounts to $300.Included in this average is $150,000 of fixed manufacturing costs.All selling and administrative costs are fixed and amount to $40,000 per month.
Pericloud Company has just received a special order for 2,000 units at $280 per unit.The buyer will pay for transportation, and the regular selling price will not be affected if Pericloud accepts the order.

Assuming Pericloud Company has excess capacity, the effect on profits of accepting the order would be a:

• A) $72,000 increase.
• B) $72,000 decrease.
• C) $35,000 increase.
• D) $35,000 decrease.

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Definitions:

Anterior Antebrachial Region

The front area of the forearm, which stretches from the elbow to the wrist.

Femoral Region

The area of the lower limb that includes the thigh, specifically referring to structures related to the femur bone.

Hypochondriac Region

One of the regions of the abdomen, located on either side just below the ribs.

Abdominopelvic Cavity

A body cavity that consists of the abdominal cavity and the pelvic cavity, housing many organs.