Able Company's unit manufacturing cost is: $\begin{array}{lr}
\text { Variable Costs } & \$ 50 \
\text { Fixed Costs } & 25
\end{array}$ A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit (loss) will be
A)$(46,000).
B)$6,000.
C)$(40,000).
D)$10,000.

Question

Quizplus · Accepted Answer

The incremental profit is calculated by considering the additional revenue and the additional costs. The revenue from the special order is 2,000 units x $55 = $110,000. The variable cost per unit increases to $52 ($50 + $2), so the total variable cost is 2,000 units x $52 = $104,000. The fixed costs do not change. Therefore, the incremental profit is $110,000 - $104,000 = $6,000.

Able Company's Unit Manufacturing Cost Is Variable Costs $50 Fixed Costs 25\begin{array}{lr}\text { Variable Costs } & \$ 50 \\\text { Fixed Costs } & 25\end{array} Variable Costs Fixed Costs ​$5025​

Able Company's Unit Manufacturing Cost Is $\begin{array}{lr}\text { Variable Costs } & \$ 50 \\\text { Fixed Costs } & 25\end{array}$