The MNK Company has gathered the following information for a unit of its most po
ID: 2463173 • Letter: T
Question
The MNK Company has gathered the following information for a unit of its most popular product: Direct materials $ 8.20 Direct labor 4.10 Overhead (40% variable) 6.10 Cost of manufacture 18.40 Desired markup (50%) 9.20 Target selling price 27.60 The above cost information is based on 4,000 units. A foreign distributor has offered to buy 1,000 units at a price of $22.60 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional $2.10 per unit for the special order. If the special order is accepted, MNK's operating profits will increase by: 4200 2100 3360 5760 7860
Explanation / Answer
Regual Sales
Export Sales with Local Sales
Particulars
Amount
Regular
Export
Total
Net Increase
Sales Units
4,000.00
4,000.00
1,000.00
Sales Price
27.60
27.60
22.60
Less : Variable Cost
-
Direct Material
8.20
-
Direct Labor
4.10
-
OH(40% of 6.10)
2.44
-
Total Variable Cost per Unit
14.74
14.74
14.74
Contribution Per unit
12.86
12.86
7.86
Total Contribution
51,440.00
51,440.00
7,860.00
59,300.00
7,860.00
Less : Fixed Cost
-
OH(60% of 6.10)
3.66
14,640.00
14,640.00
14,640.00
Net Operating Income
36,800.00
36,800.00
7,860.00
44,660.00
7,860.00
Option D is correct
Regual Sales
Export Sales with Local Sales
Particulars
Amount
Regular
Export
Total
Net Increase
Sales Units
4,000.00
4,000.00
1,000.00
Sales Price
27.60
27.60
22.60
Less : Variable Cost
-
Direct Material
8.20
-
Direct Labor
4.10
-
OH(40% of 6.10)
2.44
-
Total Variable Cost per Unit
14.74
14.74
14.74
Contribution Per unit
12.86
12.86
7.86
Total Contribution
51,440.00
51,440.00
7,860.00
59,300.00
7,860.00
Less : Fixed Cost
-
OH(60% of 6.10)
3.66
14,640.00
14,640.00
14,640.00
Net Operating Income
36,800.00
36,800.00
7,860.00
44,660.00
7,860.00
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