The Young Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { | l | r | }
\hline \text { Direct materials } & \$ 12 \
\hline \text { Direct labor } & 6 \
\hline \text { Overhead (40\% variable) } & 10 \
\hline \text { Cost to manufacture } & 28 \
\hline \text { Desired markup (60\%) } & 14 \
\hline \text { Target selling price } & \$ 42 \
\hline
\end{array}$$
The above cost information is based on 10,000 units.A distributor has offered to buy 2,000 units at a price of $32 per unit.This special order would not disturb regular sales.Special packaging and other selling expenses would be an additional $0.50 per unit for the special order.If the special order is accepted,Young's operating profits will increase by:

A) $4,000.
B) $6,400.
C) $8,000.
D) $19,000.

Question

The Young Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { | l | r | } 
\hline \text { Direct materials } & \$ 12 \
\hline \text { Direct labor } & 6 \
\hline \text { Overhead (40\% variable) } & 10 \
\hline \text { Cost to manufacture } & 28 \
\hline \text { Desired markup (60\%) } & 14 \
\hline \text { Target selling price } & \$ 42 \
\hline
\end{array}$$
 The above cost information is based on 10,000 units.A distributor has offered to buy 2,000 units at a price of $32 per unit.This special order would not disturb regular sales.Special packaging and other selling expenses would be an additional $0.50 per unit for the special order.If the special order is accepted,Young's operating profits will increase by:

A) $4,000.
B) $6,400.
C) $8,000.
D) $19,000.

Quizplus · Accepted Answer

The Answer of The Young Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { | l | r | } 
\hline \text { Direct materials } & \$ 12 \
\hline \text { Direct labor } & 6 \
\hline \text { Overhead (40\% variable) } & 10 \
\hline \text { Cost to manufacture } & 28 \
\hline \text { Desired markup (60\%) } & 14 \
\hline \text { Target selling price } & \$ 42 \
\hline
\end{array}$$
 The above cost information is based on 10,000 units.A distributor has offered to buy 2,000 units at a price of $32 per unit.This special order would not disturb regular sales.Special packaging and other selling expenses would be an additional $0.50 per unit for the special order.If the special order is accepted,Young's operating profits will increase by:

A) $4,000.
B) $6,400.
C) $8,000.
D) $19,000.

The Young Company Has Gathered the Following Information for a Unit