Falcon Co. produces a single product. Its normal selling price is $27 per unit. The variable costs are $17 per unit. Fixed costs are $21,400 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,530 units with a special price of $19 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, the differential effect on profit would be a(n) Oa increase of $4,896 O b. increase of $7,956 Oc. increase of $6,120 O d. decrease of $3.672

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Falcon Co. produces a single product. Its normal selling price is $27 per unit. The variable costs are $17 per unit. Fixed costs are $21,400 for a normal production run of 5,000 units per month. Falcon received a request for a
special order that would not interfere with normal sales. The order was for 1,530 units with a special price of $19 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit
would be eliminated. If the order is accepted, the differential effect on profit would be a(n)
O a increase of $4,896
O b. increase of $7,956
Oc. increase of $6,120
O d. decrease of $3.672
Transcribed Image Text:Falcon Co. produces a single product. Its normal selling price is $27 per unit. The variable costs are $17 per unit. Fixed costs are $21,400 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,530 units with a special price of $19 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, the differential effect on profit would be a(n) O a increase of $4,896 O b. increase of $7,956 Oc. increase of $6,120 O d. decrease of $3.672
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