Answer:
Differential profit Profit = $40,000
Explanation:
<em>The differential operating profit is the difference between the operating profit before the introduction of the product and after the introduction of the new product</em>
<em>Profit = Revenue - costs</em>
Profit before the introduction of the new product
= 2,000,000 - 1,500,000 = 500,000
Profit after the introduction of the new product
New revenue = (2,000,000 + 200,000) = 2,200,000
Cumulative cost = 1,500,000 + 160,000 = 1,660,000
Profit = 2,200,000 - 1,660,000 = 540000
Differential profit Profit = 540,000 - 500,000= $40,000
