Swisser Vase Company manufactures and sells vases.Great Products Company has offered Swisser Vase $16 per vase for 5,000 vases.Swisser Vase's normal selling price is $28 per vase.The total manufacturing cost per vase is $18 and consists of variable costs of $14 per vase and fixed overhead costs of $4 per vase.(NOTE: Assume excess capacity and no effect on regular sales.) How much are the expected increase (decrease)in revenues and expenses from the special sales order?

Question

Quizplus · Accepted Answer

The expected increase in revenue can be calculated as follows:

Revenue from special sales order = 5,000 x $16 = $80,000

Therefore, the expected increase in revenue is $80,000.

The expected increase in expenses can be calculated as follows:

Total expenses for special sales order = (variable cost per vase x number of vases) + (fixed overhead cost per vase x number of vases) 
= ($14 x 5,000) + ($4 x 5,000)
= $70,000

Therefore, the expected increase in expenses is $70,000.

Hence, the correct answer is B.

Swisser Vase Company Manufactures and Sells Vases