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12 June, 11:07

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).

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  1. 12 June, 14:30
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    Incremental profit = $30000

    so correct option is a. $30,000

    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
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