A company's unit costs based on 100,000 units are: $\begin{array}{lr}
\text { Variable costs } & \$ 75 \
\text { Fixed costs } & 30
\end{array}$ The normal unit sales price per unit is $165.A special order from a foreign company has been received for 5,000 units at $135 a unit.In order to fulfill the order, 3,000 units of regular sales would have to be foregone.
-The incremental profit (loss) from accepting the order would be

Question

A company's unit costs based on 100,000 units are: $\begin{array}{lr}
\text { Variable costs } & \$ 75 \
\text { Fixed costs } & 30
\end{array}$ The normal unit sales price per unit is $165.A special order from a foreign company has been received for 5,000 units at $135 a unit.In order to fulfill the order, 3,000 units of regular sales would have to be foregone. 
-The incremental profit (loss) from accepting the order would be

Quizplus · Accepted Answer

The incremental profit from accepting the order is the difference between the revenue from the special order and the variable costs of producing the 5,000 units. The revenue from the special order is 5,000 x $135 = $675,000. The variable costs of producing the 5,000 units is 5,000 x $75 = $375,000. Therefore, the incremental profit from accepting the order is $675,000 - $375,000 = $300,000. However, the company would have to foregone 3,000 units of regular sales in order to fulfill the special order. The revenue from the foregone sales is 3,000 x $165 = $495,000. Therefore, the net incremental profit from accepting the order is $300,000 - $495,000 = $195,000.

A Company's Unit Costs Based on 100,000 Units Are Variable costs $75 Fixed costs 30\begin{array}{lr}\text { Variable costs } & \$ 75 \\\text { Fixed costs } & 30\end{array} Variable costs Fixed costs ​$7530​

A Company's Unit Costs Based on 100,000 Units Are $\begin{array}{lr}\text { Variable costs } & \$ 75 \\\text { Fixed costs } & 30\end{array}$