S'Round Sound, Inc Rhythm Company Has Offered to Purchase 3,000 IT-54s at $16

question 27

Multiple Choice

S'Round Sound, Inc. reported the following results from the sale of 24,000 units of IT-54: $$\begin{array} { l r } \text { Sales } & \$ 528,000 \\\text { Variable manufacturing costs } & 288,000 \\\text { Fixed manufacturing costs } & 120,000 \\\text { Variable selling costs } & 52,800 \\\text { Fixed administrative costs } & 35,200\end{array}$$ Rhythm Company has offered to purchase 3,000 IT-54s at $16 each. Sound has available capacity, and the president is in favor of accepting the order. She feels it would be profitable because no variable selling costs will be incurred. The plant manager is opposed because the "full cost" of production is $17. Which of the following correctly notes the change in income if the special order is accepted?

• A) $3,000 decrease.
• B) $3,000 increase.
• C) $12,000 decrease.
• D) $12,000 increase.
• E) None of the other answers are correct.

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