PRO Shops 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: $$\begin{array} { l r }
\text { Direct material } & \$ 10 \
\text { Direct labour } & 5 \
\text { Variable overhead } & 3 \
\text { Fixed overhead } & 4
\end{array}$$ An order for 7,000 units has been received from a Japanese 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) Not change

Question

PRO Shops 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: $$\begin{array} { l r } 
\text { Direct material } & \$ 10 \
\text { Direct labour } & 5 \
\text { Variable overhead } & 3 \
\text { Fixed overhead } & 4
\end{array}$$ An order for 7,000 units has been received from a Japanese 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) Not change

Quizplus · Accepted Answer

The Answer of PRO Shops 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: $$\begin{array} { l r } 
\text { Direct material } & \$ 10 \
\text { Direct labour } & 5 \
\text { Variable overhead } & 3 \
\text { Fixed overhead } & 4
\end{array}$$ An order for 7,000 units has been received from a Japanese 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) Not change

PRO Shops Has a Capacity of 45,000 Units and Is