The Varone Company Makes a Single Product Called a Hom

question 38

Multiple Choice

The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom at that activity level are: The regular selling price for one Hom is $60. A special order has been received at Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 25%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $12,000 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
-If Varone can expect to sell 32,000 Homs next year through regular channels and the special order is accepted at 15% off the regular selling price,the effect on net operating income next year due to accepting this order would be a:

• A)$52,000 increase
• B)$80,000 increase
• C)$24,000 decrease
• D)$68,000 increase

---

Definitions:

Androgynous

Describes a person or feature that has qualities or aspects traditionally considered both male and female.

Gender Identity

One's personal sense of their own gender, which may or may not correspond with the sex they were assigned at birth.

Gender Expression

The external manifestation of an individual’s gender identity, through clothing, behavior, hairstyle, voice, and body characteristics.

Gender Roles

Societal norms dictating the types of behaviors which are generally considered acceptable, appropriate, or desirable for people based on their actual or perceived sex or gender.