Figure 17-2
Wannabee Company manufactures a product with the following costs per unit at the expected production level of 84,000 units:
The company has the capacity to produce 90,000 units. The product regularly sells for $120.
-Refer to Figure 17-2. If a wholesaler offered to buy 4,500 units for $100 each, the effect of the special order on income would be a
A) $45,000 increase.
B) $153,000 increase.
C) $450,000 increase.
D) $90,000 decrease.

Question

Figure 17-2
Wannabee Company manufactures a product with the following costs per unit at the expected production level of 84,000 units:
  The company has the capacity to produce 90,000 units. The product regularly sells for $120.
-Refer to Figure 17-2. If a wholesaler offered to buy 4,500 units for $100 each, the effect of the special order on income would be a
A) $45,000 increase. 
B) $153,000 increase. 
C) $450,000 increase. 
D) $90,000 decrease.

Quizplus · Accepted Answer

The special order would generate additional revenue of $450,000 (4,500 units x $100). Assuming variable costs are covered and fixed costs remain unchanged, the increase in income would be the difference between the revenue and the variable costs, which is $153,000.

Figure 17-2 Wannabee Company Manufactures a Product with the Following Costs Per