The Young Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r }
\text { Direct materials } & \$ 12 \
\text { Direct labor } & 6 \
\text { Overhead (40\% variable) } & \underline{ 10 }\
\text { Cost to marnufacture } & 28 \
\text { Desired markup (50\%) } &\underline{ 14 }\
\text { Target selling price } &\underline{ \$ 42 }\

\end{array}$$
The above cost information is based on 10,000 units. A distributor has offered to buy 2,000 units at a price of $32 per unit.
- This special order would not disturb regular sales. Special packaging and other selling expenses would be an additional $0.50 per unit for the special order. If the special order is accepted, Young's operating profits will increase by:
A) $4,000.
B) $6,400.
C) $8,000.
D) $19,000.

Question

The Young Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 12 \
\text { Direct labor } & 6 \
\text { Overhead (40\% variable) } & \underline{ 10 }\
 \text { Cost to marnufacture } & 28 \
\text { Desired markup (50\%) } &\underline{  14 }\
 \text { Target selling price } &\underline{  \$ 42 }\

\end{array}$$
The above cost information is based on 10,000 units. A distributor has offered to buy 2,000 units at a price of $32 per unit.
- This special order would not disturb regular sales. Special packaging and other selling expenses would be an additional $0.50 per unit for the special order. If the special order is accepted, Young's operating profits will increase by:
A) $4,000.
B) $6,400.
C) $8,000.
D) $19,000.

Quizplus · Accepted Answer

The Answer of The Young Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 12 \
\text { Direct labor } & 6 \
\text { Overhead (40\% variable) } & \underline{ 10 }\
 \text { Cost to marnufacture } & 28 \
\text { Desired markup (50\%) } &\underline{  14 }\
 \text { Target selling price } &\underline{  \$ 42 }\

\end{array}$$
The above cost information is based on 10,000 units. A distributor has offered to buy 2,000 units at a price of $32 per unit.
- This special order would not disturb regular sales. Special packaging and other selling expenses would be an additional $0.50 per unit for the special order. If the special order is accepted, Young's operating profits will increase by:
A) $4,000.
B) $6,400.
C) $8,000.
D) $19,000.

The Young Company Has Gathered the Following Information for a Unit