Ratzlaff Company has a current production level of 20,000 units per month

ACCOUNTING

Multiple Choice

Ratzlaff Company has a current production level of 20,000 units per month. Unit costs at this level are:



Direct materials $0.25

Direct labor 0.40

Variable overhead 0.15

Fixed overhead 0.20

Marketing - fixed 0.20

Marketing/distribution - variable 0.40



Current monthly sales are 18,000 units. Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each. Current sales would not be affected by the one-time-only special order, and variable marketing/distribution costs would not be incurred on the special order. What is Ratzlaff Company’s change in operating profits if the special order is accepted?

a. $400 increase in operating profits

b. $400 decrease in operating profits

c. $1,800 increase in operating profits

d. $1,800 decrease in operating profits


Click here for the SOLUTION