Answer:
Increase by $5,975
Explanation:
Calculation to determine the profit
First step is to calculate the Direct Material and Direct labor per unit
Direct Material and Direct labor per unit=$100,000/16,000
Direct Material and Direct labor per unit=$6.25
Second step is to calculate the Relevant Variable Overhead
Relevant Variable Overhead = 20,000 * 20%
Relevant Variable Overhead= $4,000
Third step is to calculate the
Relevant Variable Cost per unit = $4,000 / 16,000
Relevant Variable Cost per unit= $0.25
Fourth step is to calculate the Total Relevant Variable cost per unit
Total Relevant Variable cost per unit = $6.25 + $0.25
Total Relevant Variable cost per unit= $6.5
Fifth step is to calculate the Relevant Contribution Margin per unit
Relevant Contribution Margin per unit = $8.05 - $6.5
Relevant Contribution Margin per unit= $1.55
Sixth step is to calculate the Total Contribution
Total Contribution = 4,500 * $1.55
Total Contribution= $6,975
Now let calculate the profit using this formula
Profit = Contribution - Fixed Cost
Let plug in the formula
Profit = $6,975 - $650 - $350
Profit = $5,975
Therefore If Benjamin accepts the offer, its profits will:Increase by $5,975
