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The Following Are the Jensen Corporation's Unit Costs of Making

question 14

Multiple Choice

The following are the Jensen Corporation's unit costs of making and selling an item at a volume of 1,000 units per month (which represents the company's capacity) :

Present sales amount to 700 units per month. An order has been received from a customer in a foreign market for 100 units. The order would not affect current sales. Fixed costs, both manufacturing and selling and administrative, are constant within the relevant range between 700 units and 1,000 units. The variable selling and administrative expenses would have to be incurred on this special order as well as for all other sales. Direct labor is a variable cost.

-How much will the company's profits be increased or (decreased) if it prices the 100 units at $7 each?

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