Figure 9-3
Miller Company Produces Speakers for Home Stereo Units

Multiple Choice

Figure 9-3
Miller Company produces speakers for home stereo units. The speakers are sold to retail stores for £30. Manufacturing and other costs are as follows: $\begin{array}{lllr}\text { Variable costs per unit: } && {\text { Fixed costs per month: }} \\\text { Direct materials } & £ 9.00 & \text { Factory overhead } & £ 120,000 \\\text { Direct labour } & 4.50 & \text { Selling and admin. } & 60,000 \\\text { Factory overhead } & 3.00 & \text { Total } & \underline{E 180,000} \\\text { Distribution } &1.50 & & \\\text { Total } &£18.00 & &\end{array}$ The variable distribution costs are for transportation to the retail stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year.
-Refer to Figure 9-3. A San Diego wholesaler has proposed to place a special one-time order of 10,000 units at a reduced price of £24 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of £3,000. All other information remains the same as the original data. What is the effect on profits if the special order is accepted?

A) increase of £75,000
B) increase of £57,000
C) decrease of £168,000
D) increase of £12,000