It costs Fisk Manufacturing $200 per unit to build an engine. Manufacturing costs are 60% variable...

It costs Fisk Manufacturing $200 per unit to build an engine. Manufacturing costs are 60% variable and 40% percent are fixed. Fisk expects to produce 75,000 engines this year (85% of the factory’s capacity) and sell them for $450 each. Trasker Company offers $180 per engine to buy 15,000 engines. If production exceeds capacity, fixed costs will increase by $400,000 to expand the factory and train new workers. However, if production is below the factory capacity fixed manufacturing costs will not increase at all.

20. The increase (or decrease) in profit from accepting the contract is:

a. Increase $750,000

b. Increase $500,000

c. Decrease profit $200,000

d. None of the above

Expert Solution

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ekkarill92 answered 1 year ago

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