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A company has been offered a special order to sell 1 , 0 0 0 units of a product at a price of $ 5

A company has been offered a special order to sell 1,000 units of a product at a price of $50 per unit. The normal selling per unit is $52. The company has spare operating capacity and can typically produce standard units using direct materials that cost $20 per unit and direct labor costs of $20 per unit. However, the firm can get a volume discount on materials which will lower the per-unit materials cost by $5.
What will be the effect on net income from accepting the special order?
$10,000 increase
$10,000 decrease
$15,000 decrease
$15,000 increase
A retailer is trying to choose how to allocate 100 square feet of floor space and is considering two different product options. Both products require the full 100 square feet, so the retailer cannot mix and match between the two products, making floor space the scarce resource.
Product A requires 2 square feet per unit and costs $30 per unit. The retailer can sell Product A for $50 per unit and sell 1,000 units per month.
Product B requires 5 square feet per unit and costs $80 per unit. The retailer can sell product B for $300 per unit and sell 100 units per month.
Which product should the retailer stock and what will be its annual effect on profits given the retailer's scarcity of floor space?
Product B and $240,000
Product A and $240,000
Product B and $264,000
Product A and $264,000
A company makes two products: Product A and Product B. The information for the two products is as follows:
Product A Product B
Selling Price $100 $250
Material $40 $80
Labor $15 $40
Variable Costs $10 $25
Material is a scarce resource. Product A takes two pounds of material and Product B takes four pounds. Labor takes one hour for Product A and three hours for Product B.
How much would the company be willing to pay for one more pound of materials?
$62.50
$42.00
$20.00
$17.50

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