Ask Question
28 December, 16:21

Kansas Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.60 per unit and fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. 3M Company has contacted Kansas Company about purchasing 20,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. If the order is accepted, what is Kansas Company's change in profits

+3
Answers (1)
  1. 28 December, 18:58
    0
    Effect on income = $8,000 increase

    Explanation:

    Giving the following information:

    Variable costs are $0.60 per unit

    3M Company has contacted Kansas Company about purchasing 20,000 units at $1.00 each.

    Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:

    Effect on income = 20,000 * (1 - 0.6) = $8,000 increase
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Kansas Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.60 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers