Rosario Manufacturing Company had the following unit costs: 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

Rosario Manufacturing Company had the following unit costs:  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

Quizplus · Accepted Answer

To determine the additional profit, we need to compare the special price offered with the unit cost of producing the product.

Unit cost = Direct materials + Direct labor + Variable overhead + Fixed overhead/number of units
= $23 + $18 + $12 + $24/5,500 units
= $11.09 per unit

Since the special price of $49 per unit is greater than the unit cost of $11.09 per unit, accepting the special order would result in additional profit.

Additional profit per unit = Special price - Unit cost
= $49 - $11.09
= $37.91

Total additional profit = Additional profit per unit x Number of units
= $37.91 x 2,750 units
= $104,197.50

Therefore, the additional profit generated by accepting the special order is $19,250 (rounded to the nearest dollar).

Rosario Manufacturing Company Had the Following Unit Costs: a One-Time