ChapterS.doc [Compatibility Model- Word PAGE LAYOUT REFERENCES MAILINGS REVIEW V

Question

ChapterS.doc [Compatibility Model- Word PAGE LAYOUT REFERENCES MAILINGS REVIEW VIEW ADD-INS 1 Normal 1 No Spac. 4) Each month Fig Company produces 11,000 units of a product that sells for $18 per unit, and has variable costs of $12 per unit. Total fixed costs for the month are $77,000. A special order is received for 5,000 units at a price of $14 per unit. Fig Company has adequate capacity for the special order. If Fig Company accepts the special order, what is the profit to Fig Company? A) There is no profit; it is loss. B) $10,000 C) $22,000 D) $99,000 Diff: 2 Page Ref: 184 LO: 5-4 AACSB: Analytic Skills a nroduct that has variable costs of $70 per

Explanation / Answer

Fixed Cost is not relavent as it is met even if the special order is not accepted

Therefore profit = Selling price - variable cost

14-12 = 2per unit

total profit = 2*5000 units = 10000$

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