Kansas Company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows: A total of 500 setups at a cost of $120 per setup are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available,but these 5,000 units would require 60 setups.If Kansas Company accepts the special order,what is the increase in costs to them?
A)$7,200
B)$40,000
C)$57,200
D)$65,000

Question

Kansas Company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows:  A total of 500 setups at a cost of $120 per setup are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available,but these 5,000 units would require 60 setups.If Kansas Company accepts the special order,what is the increase in costs to them?
A)$7,200 
B)$40,000 
C)$57,200 
D)$65,000

Quizplus · Accepted Answer

The Answer of Kansas Company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows:  A total of 500 setups at a cost of $120 per setup are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available,but these 5,000 units would require 60 setups.If Kansas Company accepts the special order,what is the increase in costs to them?
A)$7,200 
B)$40,000 
C)$57,200 
D)$65,000

Kansas Company Produces and Sells 20,000 Units at $22 Per