Total fixed costs or variable costs per unit

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Reference no: EM13792253

Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 12,500 cases of sauce each year but is currently only manufacturing and selling 11,000. The following costs relate to annual operations at 11,000 cases:

Total Cost

Variable manufacturing cost $165,000

Fixed manufacturing cost $48,000

Variable selling and administrative cost $22,000

Fixed selling and administrative cost $30,000

Gwinnett normally sells its sauce for $30 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,500 cases of sauce but only if they can get the sauce for $15 per case. This special order would not affect regular sales or total fixed costs or variable costs per unit. If this special order is accepted, Gwinnett's profits for the year will:

A) increase by $60

B) decrease by $3,000

C) decrease by $22,000

D) decrease by $19,000

Reference no: EM13792253

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