The following information relates to a product produced by Ashland Company: Fixed selling costs are $1,000,000 per year.Variable selling costs of $4 per unit sold are added to cover the transportation cost.Although production capacity is 500,000 units per year,Ashland expects to produce only 400,000 units next year.The product normally sells for $40 each.A customer has offered to buy 60,000 units for $30 each.The customer will pay the transportation charge on the units purchased.If Ashland accepts the special order,the effect on income would be a:
A)$60,000 increase.
B)$180,000 increase.
C)$420,000 increase.
D)$600,000 decrease.

Question

The following information relates to a product produced by Ashland Company:  Fixed selling costs are $1,000,000 per year.Variable selling costs of $4 per unit sold are added to cover the transportation cost.Although production capacity is 500,000 units per year,Ashland expects to produce only 400,000 units next year.The product normally sells for $40 each.A customer has offered to buy 60,000 units for $30 each.The customer will pay the transportation charge on the units purchased.If Ashland accepts the special order,the effect on income would be a:
A)$60,000 increase. 
B)$180,000 increase. 
C)$420,000 increase. 
D)$600,000 decrease.

Quizplus · Accepted Answer

The Answer of The following information relates to a product produced by Ashland Company:  Fixed selling costs are $1,000,000 per year.Variable selling costs of $4 per unit sold are added to cover the transportation cost.Although production capacity is 500,000 units per year,Ashland expects to produce only 400,000 units next year.The product normally sells for $40 each.A customer has offered to buy 60,000 units for $30 each.The customer will pay the transportation charge on the units purchased.If Ashland accepts the special order,the effect on income would be a:
A)$60,000 increase. 
B)$180,000 increase. 
C)$420,000 increase. 
D)$600,000 decrease.

The Following Information Relates to a Product Produced by Ashland