Burns Decides to Accept the Special Order for 5,000 Units

question 78

Multiple Choice

Burns decides to accept the special order for 5,000 units from Allen at a unit sales price that will add $100,000 per month to its operating income.The unit price Burns charging Allen is:

• A)$20.80.
• B)$60.00.
• C)$62.50.
• D)$55.00.

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Definitions:

Fixed Costs

Costs that remain constant regardless of a company's level of activity, including lease payments, wages, and insurance fees.

Variable Cost

A cost that grows in direct proportion to the volume of output or sales.

Fixed Costs

Regular expenses that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums.

Capacity

The maximum amount or number that something can contain or accommodate.