Rosario Manufacturing Company had the following unit costs: $\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labor } & 8 \
\text { Variable factory overhead } & 10 \
\text { Fixed factory overhead (allocated) } & 18
\end{array}$ A one-time customer has offered to buy 2,750 units at a special price of $49 per unit. Assuming that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit (loss) will be generated by accepting the special order?
A)$134,750 profit
B)$19,250 profit
C)$84,000 loss
D)$16,500 loss

Question

Quizplus · Accepted Answer

The additional profit can be calculated by subtracting the variable costs from the special price and then multiplying by the number of units. Variable costs include direct materials ($24), direct labor ($8), and variable factory overhead ($10), totaling $42 per unit. The special price is $49 per unit. The difference is $7 per unit. For 2,750 units, the additional profit is 2,750 units * $7/unit = $19,250. Fixed costs are not considered as they do not change with the production of additional units for the special order.

Rosario Manufacturing Company Had the Following Unit Costs A One-Time Customer Has Offered to Buy 2,750 Units at Direct