Wade Company Is Operating at 75% of Its Manufacturing Capacity

question 3

Multiple Choice

Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available: In producing 20,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred. What is the effect on income if Wade accepts this order?

• A) Income will decrease by $4 per unit.
• B) Income will increase by $4 per unit.
• C) Income will increase by $5 per unit.
• D) Income will decrease by $5 per unit.
• E) Income will increase by $11 per unit.

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Definitions:

Five Tiers

Refers to a hierarchical approach in various contexts, often used to classify or organize information, objects, or entities across five levels of importance or complexity.

International Integrated Reporting

A framework for corporate reporting that combines financial and non-financial data to provide a holistic view of an organization's performance.

Value Creation

The process through which businesses generate additional worth for their stakeholders, including customers, shareholders, and employees.

Six Capitals

A framework that identifies six types of capital organizations use to create value: financial, manufactured, intellectual, human, social and relationship, and natural.