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?
Definitions:
Issued Capital
The total value of a company's shares that have been sold to shareholders.
Tax Rate
is the percentage at which an individual or corporation is taxed by the government.
Consolidation Entry
An accounting entry made to consolidate the financial statements of a parent company with those of its subsidiaries.
Accrued Interest
Interest that has been earned but not yet received or recorded as income by the end of the accounting period.
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