Question

A special order for 2000 units has been received from a foreign company. The unit price requested is $54. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit (loss) will be

Answer 1

Answer:

Incremental profit $4,000

Explanation:

Calculation to determine If the order is accepted, incremental profit (loss) will be

Using this formula

Incremental profit (loss)=(Special order units*unit price)- [Special order units*(Variable cost +Additional freight costs)]

Let plug in the formula

Incremental profit (loss)=(2000* $54) - [2000*($50+$2)]

Incremental profit (loss)=$108,000-(2,000*$52)

Incremental profit (loss)=$108,000 - $104,000

Incremental profit (loss)=$4,000

Therefore If the order is accepted, incremental profit will be $4,000