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1. A company manufactures and sells a single product. The variable cost of the product is $2.50 per unit and all production each month is sold at a price of $3.70 per unit. A potential new customer has offered to buy 6,000 units per month at a price of $2.95 per unit. The company has sufficient spare capacity to produce this quantity. If the new business is accepted, sales to existing customers are expected to fall by two units for every 15 units sold to the new customer. What would be the overall increase in monthly profit which would result from accepting the new business? (a)  $1,740 (b)  $2,220 (c)  $2,340 (d)  $2,700

1. A company manufactures and sells a single product. The variable cost of the product is $2.50 per unit and all production each month is sold at a price of $3.70 per unit. A potential new customer has offered to buy 6,000 units per month at a price of $2.95 per unit. The company has sufficient spare capacity to produce this quantity. If the new business is accepted, sales to existing customers are expected to fall by two units for every 15 units sold to the new customer. What would be the overall increase in monthly profit which would result from accepting the new business? (a)  $1,740 (b)  $2,220 (c)  $2,340 (d)  $2,700

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 6EB: Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit...
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1. A company manufactures and sells a single product. The variable cost of the product is $2.50 per unit and all production each month is sold at a price of $3.70 per unit. A potential new customer has offered to buy 6,000 units per month at a price of $2.95 per unit. The company has sufficient spare capacity to produce this quantity. If the new business is accepted, sales to existing customers are expected to fall by two units for every 15 units sold to the new customer.

What would be the overall increase in monthly profit which would result from accepting the new business?

(a)  $1,740

(b)  $2,220

(c)  $2,340

(d)  $2,700

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