Figure 9-9
Boone Products had the following unit costs: $\begin{array}{lr}
\text { Direct materials } & £ 24 \
\text { Direct labour } & 10 \
\text { Variable factory overhead } & 8 \
\text { Fixed factory overhead (allocated) } & 18
\end{array}$
-Refer to Figure 9-9. A one-time customer has offered to buy 1,000 units at a special price of £48 per unit. Assuming that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit (loss) will be generated from the special order?
A)£12,000 loss
B)£14,000 profit
C)£48,000 profit
D)£6,000 profit

Question

Quizplus · Accepted Answer

To calculate the additional profit from the special order, we first determine the variable cost per unit, which is the sum of direct materials, direct labor, and variable factory overhead (£24 + £10 + £8 = £42). Fixed costs are not considered for the additional order as they do not change with the production of extra units. The special price is £48 per unit. The profit per unit is the special price minus the variable cost per unit (£48 - £42 = £6). For 1,000 units, the additional profit is 1,000 units * £6/unit = £6,000.

Figure 9-9 Boone Products Had the Following Unit Costs -Refer to Figure 9-9

Figure 9-9
Boone Products Had the Following Unit Costs -Refer to Figure 9-9