The following information is provided for the year: Actual overhead $225,000 Actual machine hours worked 25,000 Budgeted machine hours 20,000 Applied overhead ($) 200,000 The predetermined rate must have been

The following information relates to a product produced by Southern Company: Direct materials $ 5 Direct labour 2 Variable overhead 6 Fixed overhead 4 Unit cost $17 Fixed selling costs are $500,000 per year. Variable selling costs of $2 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Southern expects to produce only 400,000 units next year. The product normally sells for $50 each unit. A customer has offered to buy 50,000 units for $24 each unit. The customer will pay the transportation charge on the units purchased. If Southern produces the special order, the effect on income would be a

a.

$650,000 increase

b.

$650,000 decrease

c.

$550,000 decrease

d.

$550,000 increase

e.

None of the answers listed here