Question

Use this information for Rylan Corporation to answer the question that follow. Rylan Corporation received an offer from an exporter for 25,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
Domestic unit sales price $22
Unit manufacturing costs:
Variable 11
Fixed 6
What is the amount of the income or loss from acceptance of the offer?

a. $125,000 loss
b. $25,000 loss
c. $25,000 income
d. $125,000 income

Answer 1

Answer:

What is the amount of the income or loss from acceptance of the offer?

b. $25,000 loss

Explanation:

If the company has a variable cost of $11 for each unit produced, then the gross margin to cover the fixed cost it's ($16 - $11 = $5), but the company has a fixed cost of $5 for each unit produced, means that the company loss $1 for each unit sold to the exporter.

The the company has a loss of $1 * 25,000 Units= $25,000