The Following Information Relates to the Magna Company for the Upcoming

question 125

Multiple Choice

The following information relates to the Magna Company for the upcoming year.
$$\begin{array} { | l | r | r | } \hline & \text { Amount } & \text { Per Unit } \\\hline \text { Sales } & \$ 4,000,000 & \$ 10.00 \\\hline \text { Cost of goods sold } & 3,200,000 & 8.00 \\\hline \text { Gross margin } & 800,000 & 2.00 \\\hline \text { Operating expenses } & \underline { 300,000 } & .75 \\\hline \text { Operating profits } & \$ 500,000 & \$ 1.25 \\\hline\end{array}$$
The cost of goods sold includes $1,200,000 of fixed manufacturing overhead;the operating expenses include $100,000 of fixed marketing expenses.A special order offering to buy 50,000 units for $7.50 per unit has been made to Magna.Fortunately,there will be no additional operating expenses associated with the order and Magna has sufficient capacity to handle the order.How much will operate profits be increased if Magna accepts the special order?

• A) $25,000.
• B) $62,500.
• C) $100,000.
• D) $125,000.

---

Definitions:

Rheostat

A variable resistor.

Tolerance

The allowable variation in a component’s specified value, such as resistance or capacitance, indicating the accuracy of its manufacture.

Color Bands

Colored stripes on components such as resistors that represent numbers according to a standardized code, used to indicate their value, tolerance, and sometimes temperature coefficient.

Ohmic Value

The resistance value of a component or material, typically measured in Ohms (Ω), indicating how much it resists the flow of electric current.