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Answer questions 6 and 7 using the following information: Hubba Company has a current production capacity level of 200,000 units per month. The variable costs
Answer questions 6 and 7 using the following information: Hubba Company has a current production capacity level of 200,000 units per month. The variable costs are $0.90 per unit. Allocated fixed costs are $0.50 per unit at the capacity level of 200,000 units. Total fixed costs are constant over the relevant range between 150,000 units and 200,000 units. Current monthly sales are 170,000 units at a per unit selling price of $3.00. Bubba Company has contacted Hubba Company about purchasing 25,000 units at $2.00 each. Current sales would not be affected by this one-time, special order and no additional fixed costs would be incurred on the special order. 6) Assume that Hubba Company has decided to accept the special order, what will be the increase in monthly total costs? a) $35,000 b) $22,500 c) $175,500 d) $273,000 e) Cannot be determined from information given 7) If Hubba accepts the special order, its monthly profit a) will increase by $15,000 b) will increase by $37,500 c) will decrease by $25,000 d) will increase by $27,500 e) will not change
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