Widget Inc manufactures widgets. The company has the capacity to produce 100,000

Question

Widget Inc manufactures widgets. The company has the capacity to produce 100,000 widgets per year, but it currently produces and sells 75,000 widgets per year. The following information relates to current production Sale price per unit $41 Variable costs per unit: Manufacturing Marketing and administrative Total fixed costs Manufacturing Marketing and administrative $77,000 $25,000 ner unit fvad rosts increase hu $5000 and variahle marketinn and ardminictrative eoste for O A. Increase by $16,000 O B. Increase by $28,000 O C. Increase by $21,000 0 D. Decrease by $16,000

Explanation / Answer

Effect of special order :

so answer is a) increase by $16,000

Incremental revenue (3000*34) 102000 Incremental cost Variable manufacturing cost (3000*23) -69000 Variable marketing and administrative expense (3000*4) -12000 Fixed cost -5000 Total incremental cost -86000 Incremental profit (loss) 16000

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