Question

Extra Company has offered to purchase 3,200 IT-54s at $15 each. Brilliant has available capacity, and the president is in favor of accepting the order. She feels it would be profitable because no variable selling costs will be incurred. The plant manager is opposed because the "full cost" of production is $17. Which of the following correctly notes the change in income if the special order is accepted?a. $3,000 decrease. b. $3,000 increase. c. $12,000 decrease. d. $12,000 increase. e. None of these.

Answer 1

E

Step-by-step explanation:

Full cost is total production cost + admin expenses + mark up.

Full cost =17*3200= 54400

Sales proceed = 3200*15=48000

Loss = 54400-48000=6400

Income decreases by 6400