Question
Benjamin Company had the following results of operations for the past year: Sales (16,000 units at $10.00) $ 160,000 Variable costs Direct materials 32,000 Direct
Benjamin Company had the following results of operations for the past year:
Sales (16,000 units at $10.00) $ 160,000
Variable costs
Direct materials 32,000
Direct labor 64,000
Overhead 3,200
Contribution margin 60,800
Fixed costs Fixed overhead 12,800
Fixed selling and administrative expenses 32,000
Income $ 16,000
A foreign company (whose sales will not affect Benjamins market) offers to buy 4,000 units at $7.50 per unit. In addition to variable costs, selling these units would increase fixed overhead by $600 and fixed selling and administrative costs by $300. Assuming Benjamin has excess capacity and accepts the offer, its profits will:
a.Increase by $30,000.
b.Increase by $6,000.
c.Decrease by $6,000.
d.Increase by $5,200.
e.Increase by $4,300.
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