The Chou Company provided the following information regarding its one and only product, rollers:

-Assuming there is excess capacity, what would be the effect of accepting a special order for 2,000 units at a price of $16.00 per roller?
A) Net income would decrease by $1,000.
B) Net income would increase by $9,000.
C) Net income would decrease by $8,000.
D) Net income would increase by $3,000.

Question

The Chou Company provided the following information regarding its one and only product, rollers:
 
-Assuming there is excess capacity, what would be the effect of accepting a special order for 2,000 units at a price of $16.00 per roller?
A) Net income would decrease by $1,000. 
B) Net income would increase by $9,000. 
C) Net income would decrease by $8,000. 
D) Net income would increase by $3,000.

Quizplus · Accepted Answer

Accepting the special order would increase net income by the contribution margin per unit multiplied by the number of units, assuming fixed costs remain unchanged.

The Chou Company Provided the Following Information Regarding Its One