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

 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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