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tresset_1
2 months ago
8

A company's unit costs based on 100,000 units are: Variable costs $75 Fixed costs 30 The normal unit sales price per unit is $16

5. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone. The incremental profit (loss) from accepting the order would be a. $30,000. b. $(150,000). c. $180,000. d. $(90,000).
Business
1 answer:
Free_Kalibri [3.7K]2 months ago
8 0

Answer:

Incremental profit = $30000

thus, the correct choice is a. $30,000

Explanation:

provided data

Variable costs = $75

Fixed costs = 30

Sales price = $165

to determine

incremental profit or loss  from approval

solution

The contribution per unit is calculated as follows:

Contribution per unit = $165 - $75

Contribution per unit = $90

Consequently, we determine the loss on contribution from forgoing regular sales:

Loss on contribution = $3000 × $90

Loss on contribution = $270000

Furthermore,

The incremental contribution for the special order is calculated as:

Incremental contribution = (135 - 75) × 5000

Incremental contribution = $300000

Thus, the incremental profit equates to:

Incremental profit = $300000 - $270000

Incremental profit = $30000

therefore, the correct option is a. $30,000

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