Answer the following question(s)using the information below.Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Welch Manufacturing has excess capacity.The following per unit data apply for sales to regular customers:

-What is the change in operating profits if the one-time-only special order for 1,000 units is accepted for $180 a unit by Welch?
A)$70,000 increase in operating profits
B)$10,000 increase in operating profits
C)$10,000 decrease in operating profits
D)$75,000 decrease in operating profits
E)$40,000 increase in operating profits

Question

Answer the following question(s)using the information below.Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Welch Manufacturing has excess capacity.The following per unit data apply for sales to regular customers:
 
-What is the change in operating profits if the one-time-only special order for 1,000 units is accepted for $180 a unit by Welch?
A)$70,000 increase in operating profits 
B)$10,000 increase in operating profits 
C)$10,000 decrease in operating profits 
D)$75,000 decrease in operating profits 
E)$40,000 increase in operating profits

Quizplus · Accepted Answer

The contribution margin per unit is $90 ($180 - $90 - $0). 
The increase in operating profit for the special order is: 
$90 x 1,000 units = $90,000. 
Therefore, accepting the one-time-only special order for 1,000 units at $180 per unit would result in an increase in operating profits of $70,000 ($90,000 - $20,000 opportunity cost).

Answer the Following Question(s)using the Information Below