Assume that Allen Distributors offers to purchase the additional 5,000 saws at a price of $47 per unit.If Burns accepts this price,Burns' monthly gross profit on sales of power saws will:
A)Increase by $35,000.
B)Increase by $185,000.
C)Decrease by $40,000.
D)Decrease by $240,000.

Question

Quizplus · Accepted Answer

The additional sales at $47 per unit, when the variable cost is $42 per unit (from previous context), results in a $5 profit per saw. Selling 5,000 more saws at this profit margin increases gross profit by $25,000 ($5 profit per unit * 5,000 units). The error in the initial calculation led to the incorrect choice; the correct calculation is indeed a profit increase, but by $25,000, not $35,000. Given the options provided, none directly match the corrected calculation, indicating a potential misunderstanding in the question's premise or a mistake in the provided options or calculations.

Assume That Allen Distributors Offers to Purchase the Additional 5,000