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

Question

Markson Company had the following results of operations for the past year: Sales (8,000 units at $20.50) Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative expenses Fixed selling and administrative expenses Operating income 164,000 $88,000 15,500 14,000 20,500 (138,000) s 26,000 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. Markson's annual productive capacity is 12.000 units. If Markson accepts this additional business, its profits will: Multiple Choice Increase by $2,350 65

Explanation / Answer

Profit increase by $2350

Particulars Amt Sales (2000 x 14.75) 29500 Less: Variable Manufacturing Cost
           (88000/8000) x 2000 22000 Less: selling and admin
             (14000/8000) x 2000 3500 Contribution Margin 4000 Less: Fixed overhead 1650 Increase in Profit 2350

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