A company contemplating the acceptance of a special order has the following unit

Question

A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units: Direct materials 4 Direct labor 10 Variable overhead Fixed overhead 6 A foreign company wants to purchase 2,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $4,000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is a. $6,000 b. $2,000 c. $(6,000) d. $(2,000)

Explanation / Answer

direct materials 4 direct labor 10 variable overhead 8 total variable cost 22 revene from special order      ( 2000*25)= 50000 less:variable cost     (2000*22) -44000 cost of special stamping machine -4,000 increase in income 2000 option ) B $2,000 answer

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