Question

A company’s unit costs based on 100000 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 7500 units at $135 a unit. In order to fulfill the order, 4100 units of regular sales would have to be foregone. The incremental profit (loss) from accepting the order would be

Answer 1

$81,000

Step-by-step explanation:

The computation of the incremental profit (loss) from accepting the order is shown below:

Contribution per unit = $165 - $75

= $90

Now

Loss on contribution for giving up regular sales is

= $4,100 × 90

= $369,000

Now Incremental contribution for special order is

= ($135 - $75) × 7,500

= $450,000

So,

Incremental profit is

= $450,000 - $369,000

= $81,000