Question 1 A company contemplating the acceptance of a special order has the fol

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Question 1 A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10000 units Direct materials Direct labor Variable overhead Fixed overhead 4 10 A foreign company wants to purchase 2300 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 $4000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is $(6900). $(2300). $2900 $6900 or this question:

Explanation / Answer

Answer is Option C

Incremental revenue (2,300 *25)                   57,500 Incremental variable costs (2,300 × 22)                 (50,600) Incremental Special Stamping Machine                   (4,000) Incremental profit if special order is accepted                      2,900

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