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Garfield Corporation is considering building a new plant in Canada

Accounting

Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 50,000 units at $5.00/unit. Below is a listing of estimated expenses:

 

Category

Total Annual Expenses

% of Annual Expense that are Fixed

Materials

$50,000

10%

Labor

$90,000

20%

Overhead

$40,000

30%

Marketing/Admin

$20,000

50%

 

A Canadian firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility.

 

How much does the Canadian contractor expect to make in commissions?

A) $25,000

B) $75,000

C) $225,000

D) $5,000

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