The Minton Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r }
\text { Direct materials } & \$ 6 \
\text { Direct labor } & 3 \
\text { Overhead (40\% variable) } & 5 \
\text { Cost to manufacture } & 14 \
\text { Desired markup (50\%) } & 7 \
\text { Target selling price } & \$ 21 \
\end{array}$$
The above cost information is based on 4,000 units. A foreign distributor has offered to buy 1,000 units at a price of $16 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional $1 per unit for the special order. If the special order is accepted, Minton's operating profits will increase by:
A) $1,000.
B) $1,600.
C) $2,000.
D) $4,000.

Question

The Minton Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 6 \
\text { Direct labor } & 3 \
\text { Overhead (40\% variable) } & 5 \
 \text { Cost to manufacture } & 14 \
\text { Desired markup (50\%) } & 7 \
 \text { Target selling price } & \$ 21 \
\end{array}$$
The above cost information is based on 4,000 units. A foreign distributor has offered to buy 1,000 units at a price of $16 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional $1 per unit for the special order. If the special order is accepted, Minton's operating profits will increase by:
A) $1,000.
B) $1,600.
C) $2,000.
D) $4,000.

Quizplus · Accepted Answer

The Answer of The Minton Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 6 \
\text { Direct labor } & 3 \
\text { Overhead (40\% variable) } & 5 \
 \text { Cost to manufacture } & 14 \
\text { Desired markup (50\%) } & 7 \
 \text { Target selling price } & \$ 21 \
\end{array}$$
The above cost information is based on 4,000 units. A foreign distributor has offered to buy 1,000 units at a price of $16 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional $1 per unit for the special order. If the special order is accepted, Minton's operating profits will increase by:
A) $1,000.
B) $1,600.
C) $2,000.
D) $4,000.

The Minton Company Has Gathered the Following Information for a Unit