(Solved):Lucas Company produces 16,000 units, operating at 80 percent of capacity. Spielberg Corp. offers…

 

Question

Lucas Company produces 16,000 units, operating at 80 percent of capacity. Spielberg Corp. offers to buy 4,000 units at $20 per unit. Coppola Inc. wants 3,000 units at $25 per unit. If Lucas’ variable costs are $10 per unit, which offer should it accept and what will be the effect on net income?

a) Spielberg, $80,000 increase

b) Coppola, $75,000 increase

c) Spielberg, $40,000 increase

d) Coppola, $45,000 increase

 

EXPERT ANSWER

Answer: d) Coppola, $45,000 increase

A)

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