Question
The answer is A, please provide an explanation to the answer. 6. Centex Tables Inc. is considering an offer of $50.00 per table on an
The answer is A, please provide an explanation to the answer.
6. Centex Tables Inc. is considering an offer of $50.00 per table on an order of 100 tables from the South Texas Fried Chicken chain of restaurants. The normal selling price is $75 per table. At this point Centex, who has production capabilities up to 12,000 units, has produced 10,000 tables, with fixed costs of $200,000 and variable manufacturing costs of 350,000. Fixed manufacturing cost, fixed selling and administrative costs and variable selling and administrative costs would not change if the order is accepted. Making the sale would not affect future sales activity. Should the offer be accepted and why?
a.***Yes, because the additional revenue would exceed the increase in costs
b. No, because the additional revenue would be less than the increase in costs
c. Yes, because there would be additional revenue but no change in costs
d. No, because fixed costs would increase
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