Multiple Choice
The following monthly financial data is for Tennis Company,a maker of tennis balls.Tennis makes 50,000 tennis balls each month.
Tennis received an offer from a tennis club to purchase 15,000 tennis balls at $1.50 per ball.Variable costs per pair will remain at $0.35.Any special orders will result in reduced sales to regular customers.However,fixed costs will not change as a result of the special order.Which of the following statements describes the best course of action for Tennis Company?
A) Reject the special order since profit will be $7,500 greater without the special order.
B) Accept the special order since fixed costs will not change.
C) Accept the special order since it will yield $1.15 per tennis ball in profit.
D) Reject the special order since the company will experience a total net loss as a result of the special order.
E) None of the answer choices is correct.
Correct Answer:
Verified
Correct Answer:
Verified
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