A business received an offer from an exporter for 10,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available: What is the amount of gain or loss from acceptance of the offer?
A) $65,000 gain
B) $50,000 loss
C) $30,000 loss
D) $20,000 loss

Question

A business received an offer from an exporter for 10,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available:  What is the amount of gain or loss from acceptance of the offer?
A) $65,000 gain 
B) $50,000 loss 
C) $30,000 loss 
D) $20,000 loss

Quizplus · Accepted Answer

To calculate the gain or loss from accepting the offer, we need to compare the revenue generated from the sale of 10,000 units at $17.50 per unit to the cost of producing and delivering these units.

The data provided includes the following relevant costs:
- Variable cost per unit: $11.00
- Fixed cost per unit: $2.50
- Delivery cost per unit: $1.50

Total cost per unit = $11 + $2.50 + $1.50 = $15.00

Revenue from selling 10,000 units at $17.50 per unit = $17.50 x 10,000 = $175,000

Total cost of producing and delivering 10,000 units = $15.00 x 10,000 = $150,000

Therefore, the gain from accepting the offer is:

Gain = Revenue - Total Cost
Gain = $175,000 - $150,000
Gain = $25,000

Since the gain is positive, we can conclude that accepting the offer would result in a $25,000 gain for the business, and the best choice is A.

A Business Received an Offer from an Exporter for 10,000