Blue Technologies manufactures and sells DVD players. Great Products Company has

Question

Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies' normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 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?

How much are the expected increase (decrease) in revenues and expenses from the special sales order?

Select one:

a. Expected increase in revenues $220,000; expected increase in expenses $140,000

b. Expected increase in revenues $220,000; expected increase in expenses $40,000

c. Expected increase in revenues $300,000; expected increase in expenses $140,000

d. Expected increase in revenues $220,000; expected increase in expenses $120,000

Explanation / Answer

Expected increase in revenues = 10000*22=$2,20,000

Expected increase in expenses = 10000*14= $1,40,000

Answer: Option a

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