Platinum Company has a capacity of 45,000 units, and is currently producing and selling 40,000 at $25 a unit. The present cost structure, on a per unit basis, is: $\begin{array}{llcc}
\text { Direct material} & \$10 \
\text { Direct labour} &5\
\text { Variable overhead } &3\
\text { Fixed overhead } &4\
\end{array}$
An order for 7,000 units has been received from a New Zealand company at a price of $20 per unit. If the order is accepted, profit will:
A) Decrease by $2,000
B) Increase by $14,000
C) Increase by $7,000
D) Remain the same

Question

Platinum Company has a capacity of 45,000 units, and is currently producing and selling 40,000 at $25 a unit. The present cost structure, on a per unit basis, is: $\begin{array}{llcc}
  \text {  Direct material} & \$10 \
 \text {  Direct labour} &5\
 \text { Variable overhead } &3\
 \text { Fixed overhead } &4\
\end{array}$
 An order for 7,000 units has been received from a New Zealand company at a price of $20 per unit. If the order is accepted, profit will:
A) Decrease by $2,000
B) Increase by $14,000
C) Increase by $7,000
D) Remain the same

Quizplus · Accepted Answer

The Answer of Platinum Company has a capacity of 45,000 units, and is currently producing and selling 40,000 at $25 a unit. The present cost structure, on a per unit basis, is: $\begin{array}{llcc}
  \text {  Direct material} & \$10 \
 \text {  Direct labour} &5\
 \text { Variable overhead } &3\
 \text { Fixed overhead } &4\
\end{array}$
 An order for 7,000 units has been received from a New Zealand company at a price of $20 per unit. If the order is accepted, profit will:
A) Decrease by $2,000
B) Increase by $14,000
C) Increase by $7,000
D) Remain the same

Platinum Company Has a Capacity of 45,000 Units, and Is