The Following Information Relates to the Jasmine Company for the Upcoming

question 28

Multiple Choice

The following information relates to the Jasmine Company for the upcoming year.
$$\begin{array} { | l | r | r | } \hline & \text { Amount } & \text { Per Unit } \\\hline \text { Sales } & \$ 8,000,000 & \$ 20.00 \\\hline \text { Cost of goods sold } & 6,400,000 & 16.00 \\\hline \text { Gross margin } & 1,600,000 & 4.00 \\\hline \text { Operating expenses } & 600,000 & 1.50 \\\hline \text { Operating profits } & \$ 1,000,000 & \$ 2.50 \\\hline\end{array}$$
The cost of goods sold includes $2,400,000 of fixed manufacturing overhead;the operating expenses include $200,000 of fixed marketing expenses.A special order offering to buy 50,000 units for $15.00 per unit has been made to Jasmine.Fortunately,there will be no additional operating expenses associated with the order;however,Jasmine is operating at full capacity.How much will operating profits increase if Jasmine accepts the special order?

• A) $50,000.
• B) $125,000.
• C) $200,000.
• D) Operating profits will not increase as a result of accepting the special order.

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Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overheads, representing the costs involved in converting raw materials into finished products.

Work in Process

Inventory that includes goods in the process of being manufactured but not yet completed.

Manufacturing Cost

The total sum of expenses related to producing goods, including raw materials, labor, and overhead costs.

Equivalent Units

A concept used in process costing that converts partially completed units into a smaller number of fully completed units, facilitating cost calculation.