Markson Company had the following results of operations for the past year: Sales (8,000 units at $19.50) Variable manufacturing costs $156,000 $84,000 14,500 Fixed manufacturing costs Variable selling and administrative expenses 10,000 Fixed selling and administrative expenses 19,500 (128,000) Operating income $28,000 A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $13.25 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,550 for the purchase of special tools. If Markson accepts this additional business, its profits will: a. Decrease by $1,550. b. Increase by $3,000. c. Decrease by $5,500. d. Decrease by $4,550. e. Increase by $1,450.

Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 16E
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Markson company had the...Accounting questions

Markson Company had the following results of operations for the past year:
Sales (8,000 units at $19.50)
Variable manufacturing costs
$156,000
$84,000
14,500
Fixed manufacturing costs
Variable selling and administrative expenses 10,000
Fixed selling and administrative expenses 19,500 (128,000)
Operating income
$28,000
A foreign company whose sales will not affect Markson's market offers to buy
2,000 units at $13.25 per unit. In addition to variable manufacturing costs, selling
these units would increase fixed overhead by $1,550 for the purchase of special
tools.
If Markson accepts this additional business, its profits will:
a. Decrease by $1,550.
b. Increase by $3,000.
c. Decrease by $5,500.
d. Decrease by $4,550.
e. Increase by $1,450.
Transcribed Image Text:Markson Company had the following results of operations for the past year: Sales (8,000 units at $19.50) Variable manufacturing costs $156,000 $84,000 14,500 Fixed manufacturing costs Variable selling and administrative expenses 10,000 Fixed selling and administrative expenses 19,500 (128,000) Operating income $28,000 A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $13.25 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,550 for the purchase of special tools. If Markson accepts this additional business, its profits will: a. Decrease by $1,550. b. Increase by $3,000. c. Decrease by $5,500. d. Decrease by $4,550. e. Increase by $1,450.
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