Question
33. Simpson Industries currently manufactures and sells 20,000 power saws per month, although it has the capacity to produce 35,000 units per month. At the
33. Simpson Industries currently manufactures and sells 20,000 power saws per month, although it has the capacity to produce 35,000 units per month. At the 20,000-unit-per-month level of production, the per-unit cost is $65, consisting of $40 in variable costs and $25 in fixed costs. Simpson sells its saws to retail stores for $80 each. Ruthy Distributors has offered to purchase 5,000 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. Assume that Ruthy Distributors offers to purchase the additional 5,000 saws at a price of $47 per unit. If Simpson accepts this price, Simpson's monthly gross profit on sales of power saws will:
Group of answer choices
Decrease by $240,000.
Increase by $185,000.
Increase by $35,000.
Decrease by $40,000
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