Boone Products had the following unit costs: A one-time customer has offered to buy 1,000 units at a special price of £48 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 from the special order?

A) £12,000 loss
B) £14,000 profit
C) £48,000 profit
D) £6,000 profit

Question

Boone Products had the following unit costs: A one-time customer has offered to buy 1,000 units at a special price of £48 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 from the special order?

A) £12,000 loss 
B) £14,000 profit 
C) £48,000 profit 
D) £6,000 profit

Quizplus · Accepted Answer

The total cost of producing 1,000 units can be calculated as follows:
Direct material cost per unit = £20
Direct labor cost per unit = £12
Variable overhead cost per unit = £6
Total variable cost per unit = £38
Therefore, total cost of producing 1,000 units = £38,000
The special price offered by the customer is £48 per unit, so the total revenue from the order would be £48,000.
Additional profit generated from the special order can be calculated as follows:
Total revenue from the order - Total cost of producing the order
= £48,000 - £38,000
= £10,000
Therefore, the additional profit generated from the special order is £10,000, which is equivalent to a profit of £10 per unit. Hence, the correct answer is D.

Boone Products Had the Following Unit Costs: a One-Time Customer