Question

Markson Company had the following results of operations for the past year:
Sales (8,000 units at $20)"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6
$160,000
Variable manufacturing costs"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6 $86,000
Fixed manufacturing costs"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6.. 15,000
Variable selling and administrative expenses"u00a6"u00a6. 12,000
Fixed selling and administrative expenses "u00a6"u00a6"u00a6. 20,000 (133,000)
Operating income"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6
$ 27,000

A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $14 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,600 for the purchase of special tools. If Markson accepts this additional business, its profits will:
A.Increase by $3,500.
B.Decrease by $5,650.
C.Decrease by $1,600.
D.Increase by $ 1,900.
E.Decrease by $5,100.

Answer

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