The Following Information Relates to a Product Produced by Orca

question 19

Multiple Choice

The following information relates to a product produced by Orca Company:
$$\begin{array} { | l c | } \hline \text { Direct materials } & \$ 20 \\\hline \text { Direct labor } & 14 \\\hline \text { Variable overhead } & 12 \\\hline \text { Fixed overhead } & 16 \\\hline \text { Unit cost } & \$ 62 \\\hline\end{array}$$
Fixed selling costs are $1,000,000 per year.Although production capacity is 500,000 units per year,Orca expects to produce only 400,000 units next year.The product normally sells for $80 each.A customer has offered to buy 60,000 units for $60 each.The customer will pay the transportation charge on the units purchased.If Orca accepts the special order,the effect on income would be a:

• A) $120,000 increase.
• B) $360,000 increase.
• C) $840,000 increase.
• D) $1,200,000 decrease.

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Definitions:

Motivator-Hygiene Theory

A theory that suggests job satisfaction and dissatisfaction arise from different sets of factors: motivators lead to satisfaction, while the absence of hygiene factors leads to dissatisfaction.

Employee Motivation

The combined internal and external factors that influence an employee's enthusiasm and willingness to invest effort in achieving organizational objectives.

Job Specialization

The process of focusing on and becoming expert in a particular task or area of work within an organization.

Work Efficiency

The effectiveness with which job responsibilities and tasks are completed using the least amount of resources or time.