Napa Company manufactures computers. The following cost information for the manufacture of one computer has been compiled: If Napa receives a special order for 500 computers at a price of $550, what will be the effect on the company's profit if the order is accepted? (Assume that other variables do not change.)

Question

Napa Company manufactures computers. The following cost information for the manufacture of one computer has been compiled:  If Napa receives a special order for 500 computers at a price of $550, what will be the effect on the company's profit if the order is accepted? (Assume that other variables do not change.)

Quizplus · Accepted Answer

To determine the effect on profit, we need to calculate the cost to manufacture 500 computers:
$165 + ($80 x 500) = $41,665
Revenue from the order would be:
$550 x 500 = $275,000
Profit would be:
$275,000 - $41,665 = $233,335
This represents an increase of $35,000 in profit (compared to not accepting the order). Therefore, the answer is B.

Napa Company Manufactures Computers