Test Exam 3 Time Remaining 022003 Submit Test This Question

Test: Exam 3 Time Remaining: 02.2003 Submit Test This Question: 1 pt 41 of 33 (2 c This Test: 33 pts possible Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $24 per DVD player for 10,000 DVD , players. Blue Technologies normal selling price is $35 per DVD player. The total manufacturing cost per DVD player is $17 and consists of variable of costs of $15 per DVD player and fixed overhead costs of $6 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.) How much are the expected increase (decrease) in revenues and expenses from the special sales order? ? A. Expected increase in revenues S240.000, expected increase in expenses $110.000 O B. Expected increase in relnes S240 000; expected increase in expenses S60.000 OC. Expected increase in revenues $240.000, expected increase in expenses $150,000 us an D. Expected increase in revenues $350.000: expected increase in expenses $150.000 e cost n A is c e salary

Solution

Increase in revenue = Offered price per unit x No. of units = $ 24 x 10,000 = $ 24,000

Increase in expenses = Variable cost per unit x No. of units = $ 15 x 10,000 = $ 15,000

There is excess capacity to produce 10,000 extra units. Fixed cost will not be considered as it is already covered by regular sales.

Hence option “C. Expected increase in revenues $ 240,000; expected increase in expenses $ 150,000” is correct answer.