1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
wolverine [178]
3 years ago
11

The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed mar

keting expenses. A special order offering to buy 50,000 units for $7.50 per unit has been made to Magna. Fortunately, there will be no additional operating expenses associated with the order and Magna has sufficient capacity to handle the order. How much will operate profits be increased if Magna accepts the special order?
Business
1 answer:
Cerrena [4.2K]3 years ago
4 0

Answer:

The correct answer is $100,000.

Explanation:

Following is the information provided:

Sales @$10 per unit                                  $4,000,000

Cost of goods @$8 per unit                    ($3,200,000)

Operating cost @$0.75 per unit             <u>  ($300,000)  </u>

Profit for the year                                     <u>   $500,000  </u>

Now the company has to calculate variable costs that are relevant here. The variable cost included in cost of goods sold is:

Variable costs per unit = (Cost of goods sold - Fixed Costs included in Cost of goods) / Units Sold

The units sold can be calculated by dividing Sales with selling price per unit. Which is:

Number of units sold = $4,000,000 / $10 per unit = 400,000 Units

Now putting values in the above equation, we have:

Variable costs = ($3,200,000 - $1,200,000) / 400,000  = $5 per unit

Other variable operating costs per unit will also be calculated as it is also a variable cost here. Because the variable operating cost per unit is relevant here for decision making, it would be calculated as under:

Variable operating cost per unit = (Operating Cost - Fixed cost included) / Number of units sold

By putting values, we have:

Variable operating cost per unit = ($300,000 - $100,000) / 400,000 units

= $0.5 per unit

Now we will calculate Net benefits arising from this order. The relevant costs are variable costs and relevant revenues are at the rate $7.5 per unit.

Cost - Benefit analysis:

Savings from sales = 50,000 units * $7.5 per unit =                     $375,000

Variable cost = 50,000 units * $5 per unit =                                 ($250,000)

Variable operating cost per unit = 50,000 units * $0.5 per unit=<u> (</u><u>$25,000)</u>

Net Saving / (Loss)                                                                           $100,000

So the net gain from this opportunity will be $100,000.

You might be interested in
According to this warranty, if the camera has had its serial number removed, would it be repaired?
bezimeni [28]
No, It would not be because it does not have a serial number.
4 0
3 years ago
Read 2 more answers
Suppose you've just inherited $66,000 from your rich Aunt. You're trying to decide whether to keep the $66,000 in cash so that y
Flauer [41]

Answer:

Opportunity cost of holding the money = $1.650

Explanation:

Opportunity cost is the value of the next best alternative sacrificed in favour of a decision.

The opportunity cost of holding the money is the interest on deposit that would be have been earned should it be invested at the savings rate.

Interest on savings deposit = interest rate × deposit

                                         = 2.5%× 66,000= $1,650

Opportunity cost of holding the money = $1.650

3 0
3 years ago
In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits: must be less than at
elena-s [515]
<span>must be less than atc</span>
7 0
3 years ago
There are two universities, A and B, in a city. Tuition rises at University A and, as a result, the demand for attending Univers
LenaWriter [7]

Answer:

Substitutes

Explanation:

The education services at the two universities are substitutes to each other. The cross price elasticity of substitute goods is positive which indicates that as the price of one good increases then as a result the demand for other good increases and if the price of one good decreases then as a result the demand for other good decreases.

Now, if there is an increase in the tuition fees at University A, hence, this will increase the price of educational services at University A. Therefore, this will lead to an increase in the demand for educational services at University B.

4 0
3 years ago
In its 2021 income statement, Cohen Corp. reported depreciation of $3,700,000 and interest revenue on municipal obligations of $
ella [17]

Answer:

The correct answer is $300,000.

Explanation:

According to the scenario, the computation of the given data are as follows:

First we calculate the difference in depreciation,

So, difference in depreciation = $5,500,000 - $3,700,000 = $1,800,000

As, Depreciation is for 3 years,

So, depreciation per year = $1,800,000 ÷ 3 = $600,000

Now, we can calculate the deferred income tax liability as follows:

Deferred income tax liability = $600,000 × 20% + $600,000 × 15% + $600,000 × 15%

= $120,000 + $90,000 + $90,000

= $300,000

5 0
3 years ago
Other questions:
  • Julie has worked for the healthy nut bread company for several years. recently, management recognized her as one of the company'
    9·1 answer
  • the federal reserve wants to increase the money supply in the money supply in the united states. What is the federal reserve lik
    11·2 answers
  • Team cohesiveness tends to be higher when A. the team is sufficiently small. B. members have limited interaction. C. entry into
    5·1 answer
  • Assume that Delaware Ice Cream Company uses the FIFO method to calculate equivalent units. It has unit costs of $10 for material
    14·1 answer
  • Assume that we are in the MM world. The beta of an all-equity firm is 1.4. Suppose the firm changes its capital structure to 40
    9·1 answer
  • When Jill was asked, she chose cars over stomach cancer as the cause of more U.S. deaths per year. When asked why she chose the
    7·1 answer
  • A college professor wants to know if the university students in the Unites States will find the new textbook that he has authore
    10·1 answer
  • Information related to Kerber Co. is presented below.
    9·1 answer
  • Dakota Company experienced the following events during Year 2. Acquired $20,000 cash from the issue of common stock. Paid $15,00
    15·1 answer
  • an employee is taking cash and making up the difference by holding the deposit until the next cash receipts are received. the be
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!