Question

A company's unit costs based on 100,000 units are: Variable costs $75 Fixed costs 30 The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone. The incremental profit (loss) from accepting the order would be a. $30,000. b. $(150,000). c. $180,000. d. $(90,000).

Answer 1

Incremental profit = $30000

so correct option is a. $30,000

Step-by-step explanation:

given data

Variable costs = $75

Fixed costs = 30

sales price = $165

to find out

incremental profit or loss from accepting

solution

we get here contribution per unit will be here as

contribution per unit = $165 - $75

contribution per unit = $90

now we get here loss on contribution for giving up regular sale that is

loss on contribution = $3000 × $90

loss on contribution = $270000

and

now we get Incremental contribution for special order will be

Incremental contribution = (135 - 75) × 5000

Incremental contribution = $300000

and

Incremental profit will be = $300000 - $270000

Incremental profit = $30000

so correct option is a. $30,000