Rose Manufacturing Company had the following unit costs: A one-time customer has offered to buy 2,000 units at a special price of $48 per unit.Assume 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?
$\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labour } & 8 \
\text { Variable factory overhead } & 10 \
\text { Fixed factory overhead (allocated) } & 18
\end{array}$
A)a $84,000 loss
B)a $24,000 loss
C)a $12,000 profit
D)a $96,000 profit

Question

Quizplus · Accepted Answer

The additional profit from accepting the special order can be calculated by considering only the variable costs (direct materials, direct labor, and variable factory overhead) since the fixed factory overhead is already incurred and will not change with the order. The variable cost per unit is $24 (direct materials) + $8 (direct labor) + $10 (variable factory overhead) = $42. The special price is $48 per unit. The profit per unit is $48 - $42 = $6. For 2,000 units, the additional profit is 2,000 units * $6 = $12,000.

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