Question

A business received an offer from an exporter for 20,000 units of product at $15 per...

A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect the normal production or domestic sale prices. The following data are available:

            Domestic unit sales price:              $21

            Unit manufacturing costs:

               Variable                                          12

               Fixed                                                  5

21. What is the differential revenue for accepting the offer?

            A. $300,000

            B. $420,000

            C. $120,000

            D. $240,000

22. What is the differential cost for accepting the offer?

            A. $200,000

            B. $120,000

            C. $140,000

            D. $240,000

23. What is the amount of gain or loss from accepting the offer?

            A. $60,000 gain

            B. $50,000 loss

            C. $30,000 loss

            D. $20,000 loss

Homework Answers

Answer #1
21 Correct answer is A. $ 3,00,000.
Differential revenue for accepting the offer is = 20,000 units X $ 15
= $     3,00,000
22 Correct Answer is D. $ 2,40,000.
Differential cost for accepting the offer = 20,000 units X $ 12
= $     2,40,000
23 Correct Answer is A. $ 60,000 gain.
Differential revenue - Differential cost =
$ 3,00,000 - $ 2,40,000
= $        60,000
or
20,000 units X ($ 15 - $ 12)
= $        60,000
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