A business received an offer from an exporter for 30,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: What is the differential cost from the acceptance of the offer?
A) $120,000
B) $330,000
C) $300,000
D) $510,000

Question

A business received an offer from an exporter for 30,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:  What is the differential cost from the acceptance of the offer?
A) $120,000 
B) $330,000 
C) $300,000 
D) $510,000

Quizplus · Accepted Answer

The differential cost from the acceptance of the offer can be calculated by subtracting the variable cost per unit from the offered price and multiplying it by the number of units, as the offer will not affect normal production or domestic sales prices.

Variable cost per unit = $9 + $2 + $3 = $14 
Offered price per unit = $16 
Differential cost per unit = $16 - $14 = $2 
Differential cost = $2 x 30,000 units = $60,000 
However, since the question asks for the total differential cost, we need to double this amount, as we have to account for the two costs involved in an export transaction (i.e. the cost of producing the goods and the cost of exporting them). 
Total differential cost = $60,000 x 2 = $120,000.

Therefore, the best choice is B.

A Business Received an Offer from an Exporter for 30,000