Markson Company had the following results of operations for the past year: A for

Question

Markson Company had the following results of operations for the past year:

A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $14.75 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,650 for the purchase of special tools. If Markson accepts this additional business, its profits will:

Sales (8,000 units at $20.50) $164,000 Variable manufacturing costs $88,000 Fixed manufacturing costs 15,500 Variable selling and administrative expenses 14,000 Fixed selling and administrative expenses 20,500 (138,000) Operating income $26,000

Explanation / Answer

Revenue 29500 =2000*14.75 Expenses: Variable manufacturing costs 22000 =88000/8000*2000 Variable selling and administrative expenses 3500 =14000/8000*2000 Purchase of special tools 1650 Increase in profits 2350

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