Wade Company Is Operating at 75% of Its Manufacturing Capacity

question 34

Multiple Choice

Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available:

In producing 20,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred. What is the effect on income if Wade accepts this order?

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Definitions:

Exchange Relationships

Interactions between two or more parties in which goods, services, or ideas are exchanged, usually in a market context.

Marketers

Individuals or companies that promote and sell products or services to consumers.

Consultant

A professional who provides expert advice in a particular area such as business, education, law, or technology.

Cupcake Shop

A specialized retail outlet that focuses on the production and sale of cupcakes, often featuring a wide variety of flavors and designs.