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. An Atlanta wholesaler has proposed to place a special one-time order for 7,000 units at a special price of £25.20 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of £6,000. In addition, assume that overtime production is not possible and that 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 £54,900
B) increase of £30,900
C) increase of £36,900
D) increase of £176,400