Each month Fig Company produces 11,000 units of a product that sells for $18 per unit,and has variable costs of $12 per unit.Total fixed costs for the month are $77,000.A special order is received for 5,000 units at a price of $14 per unit.Fig Company has adequate capacity for the special order.If Fig Company accepts the special order,what is the profit to Fig Company from the special order?
A) $0
B) $10,000
C) $22,000
D) $99,000

Question

Quizplus · Accepted Answer

To determine the profit from the special order, we first need to calculate the incremental revenue and incremental costs.

Incremental revenue: 
5,000 units x $14 per unit = $70,000

Incremental costs: 
5,000 units x $12 per unit = $60,000

Therefore, the incremental profit from the special order is: 
$70,000 - $60,000 = $10,000

Since the special order has a positive incremental profit, it is beneficial for Fig Company to accept the order. The correct answer is B) $10,000.

Each Month Fig Company Produces 11,000 Units of a Product