Question
Markson Company had the following results of operations for the past year: Sales (8,000 units at $20.70) $ 165,600 Variable manufacturing costs $ 88,800 Fixed
Markson Company had the following results of operations for the past year:
Sales (8,000 units at $20.70) | $ | 165,600 | ||||||
Variable manufacturing costs | $ | 88,800 | ||||||
Fixed manufacturing costs | 15,700 | |||||||
Variable selling and administrative expenses | 14,800 | |||||||
Fixed selling and administrative expenses | 20,700 | (140,000 | ) | |||||
Operating income | $ | 25,600 | ||||||
A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $15.05 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,670 for the purchase of special tools. Marksons annual productive capacity is 12,000 units. If Markson accepts this additional business, its profits will:
Multiple Choice
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Decrease by $1,670.
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Decrease by $5,870.
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Decrease by $4,900.
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Increase by $4,200.
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Increase by $2,530.
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