Answer:
The correct answer is $100,000.
Explanation:
Following is the information provided:
Sales @$10 per unit $4,000,000
Cost of goods @$8 per unit ($3,200,000)
Operating cost @$0.75 per unit <u> ($300,000) </u>
Profit for the year <u> $500,000 </u>
Now the company has to calculate variable costs that are relevant here. The variable cost included in cost of goods sold is:
Variable costs per unit = (Cost of goods sold - Fixed Costs included in Cost of goods) / Units Sold
The units sold can be calculated by dividing Sales with selling price per unit. Which is:
Number of units sold = $4,000,000 / $10 per unit = 400,000 Units
Now putting values in the above equation, we have:
Variable costs = ($3,200,000 - $1,200,000) / 400,000 = $5 per unit
Other variable operating costs per unit will also be calculated as it is also a variable cost here. Because the variable operating cost per unit is relevant here for decision making, it would be calculated as under:
Variable operating cost per unit = (Operating Cost - Fixed cost included) / Number of units sold
By putting values, we have:
Variable operating cost per unit = ($300,000 - $100,000) / 400,000 units
= $0.5 per unit
Now we will calculate Net benefits arising from this order. The relevant costs are variable costs and relevant revenues are at the rate $7.5 per unit.
Cost - Benefit analysis:
Savings from sales = 50,000 units * $7.5 per unit = $375,000
Variable cost = 50,000 units * $5 per unit = ($250,000)
Variable operating cost per unit = 50,000 units * $0.5 per unit=<u> (</u><u>$25,000)</u>
Net Saving / (Loss) $100,000
So the net gain from this opportunity will be $100,000.
