Question

Helmsman Products sells a special type of navigation equipment for $ 1 comma 400. Variable costs are $ 900 per unit. When a special order arrived from a foreign contractor to buy 44 units at a reduced sales price of $ 1 comma 000 per​ unit, there was a discussion among the managers. The controller said that as long as the special price was greater than the variable​ costs, the sale would contribute to the​ company's profits and should be accepted as offered. The vice​ president, however, decided to decline the order. Which of the following statements supports the decision of the vice​ president?

a. The order is not likely to affect the regular sales.
b. The company is operating at 70% of its production capacity.
c. The variable costs of $900 include variable costs of packing the product.
d. The company will need to hire additional staff to execute this order.

Answer 1

Option D is correct.

Step-by-step explanation:

The company might continue to employ extra personnel for enforcing one such task because, although, the Vice-President preferred to cancel that deal upon this basis that the manager claimed that, as far as the fixed price remained higher than the variable rate, the deal might well benefit to the business's earnings and might be approved as negotiated.

So, The following are the reason that describes the following option is correct according to the scenario.

• Option A is not true according to the scenario because the request is unlikely to impact daily revenue.
• Option B is not true according to the scenario because the company operates at 70% of all its manufacturing capability.
• Option C is not true according to the scenario because the contribution margin includes the contribution margin of wrapping the product.