Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product units per year. A customer has offered to buy an additional 4,000
Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product units per year. A customer has offered to buy an additional 4,000 units at $25 each and sell them outside the country so as not to compete with Termus. The following data are available: Costs at 85% Capacity. Per Unit. Total Direct materials $10.00 $425,000 Direct labor 8.00 340,000 Overhead (fixed and variable) 13.00 552.500 Totals $31.00 $1,317,500 In producing 4,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $4 per unit would be incurred. What is the effect on income if Termus accepts this order? Income will decrease by $6 per unit. Income will increase by $6 per unit. Income will increase by $7 per unit. Income will decrease by $3 per unit. Income will increase by $3 per unit.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started