Amaryliz Products had the following unit costs:

A one-time customer has offered to buy 4,000 units at a special price of $60 per unit.Because of capacity constraints, 1,000 units will need to be produced during overtime.Overtime premium is $15 per unit.How much additional profit or loss will be generated by accepting the special order?
A) $60,000 profit
B) $52,000 loss
C) $27,000 loss
D) $37,000 profit

Question

Amaryliz Products had the following unit costs:

A one-time customer has offered to buy 4,000 units at a special price of $60 per unit.Because of capacity constraints, 1,000 units will need to be produced during overtime.Overtime premium is $15 per unit.How much additional profit or loss will be generated by accepting the special order?
A) $60,000 profit 
B) $52,000 loss 
C) $27,000 loss 
D) $37,000 profit

Quizplus · Accepted Answer

Total variable cost = Direct materials + Direct labor + Variable overhead
 11ea8a4c_48ac_e810_a0e6_db8bdf9fdd90_TB5550_00 Total variable cost = $20 + $15 + $12 = $47
*Profit without overtime cost = [Units sold that are not produced in overtime × (Sales price per unit - Variable cost per unit]
Profit without overtime cost = [(4,000- 1,000) units × ($60- $47)] = $39,000
**Profit with overtime cost = Number of units produced with overtime cost × [Selling price - (Variable cost per unit + Overtime premium per unit)]
Profit with overtime cost = 1,000 units × [$60 - ($47 + $15)] = 1,000 units × ($60 - $62) = ($2,000)

Amaryliz Products Had the Following Unit Costs