Helmsman Products sells a special type of navigation equipment for $ 1 comma 200. Variable costs are $ 800 per unit. When a special order arrived from a foreign contractor to buy 40 units at a reduced sales price of $ 1 comma 000 per unit, there was a discussion among the managers. The controller said that as long as the special price was greater than the variable costs, the sale would contribute to the company's profits and should be accepted as offered. The vice president, however, decided to decline the order. Which of the following statements supports the decision of the vice president? A. The company will need to hire additional staff to execute this order. B. The order is not likely to affect the regular sales. C. The variable costs of $ 800 includes variable costs of packing the product. D. The company is operating at 70% of its production capacity.

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Business

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19 June, 07:49

Helmsman Products sells a special type of navigation equipment for $ 1 comma 200. Variable costs are $ 800 per unit. When a special order arrived from a foreign contractor to buy 40 units at a reduced sales price of $ 1 comma 000 per unit, there was a discussion among the managers. The controller said that as long as the special price was greater than the variable costs, the sale would contribute to the company's profits and should be accepted as offered. The vice president, however, decided to decline the order. Which of the following statements supports the decision of the vice president? A. The company will need to hire additional staff to execute this order. B. The order is not likely to affect the regular sales. C. The variable costs of $ 800 includes variable costs of packing the product. D. The company is operating at 70% of its production capacity.

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Answers (1)

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Luz Cantu · Answer 1

A. The company will need to hire additional staff to execute this order.

Explanation:

Since it is a special order, that too with a lower sale price, will affect the normal sales, and for this in order to make this order viable and not affect normal sales we need additional staff. Normal sales are domestic in nature, variable packing cost for international transfer will be additional to normal variable cost of $800 as would not be included, it does not matter whether currently the company is operating at 70% capacity as total fixed cost will be same additional variable cost based on number of units will be incurred then contribution margin will provide for profit, thus

Therefore The statement supporting Vice President is

A. The company will need to hire additional staff to execute this order.