Menagerie Products had the following unit costs: $$\begin{array} { l r }
\text { Direct materials } & \$ 24 \
\text { Direct labor } & 10 \
\text { Variable factory overhead } & 8 \
\text { Fixed factory overhead (allocated) } & 18
\end{array}$$ A one-time customer has offered to buy 900 units at a special price of $47 per unit. Assuming that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit (loss) will be generated from the special order?
A)$6,000 loss
B)$4,500 profit
C)$12,500 profit
D)$42,300 profit

Question

Menagerie Products had the following unit costs: $$\begin{array} { l r } 
\text { Direct materials } & \$ 24 \
\text { Direct labor } & 10 \
\text { Variable factory overhead } & 8 \
\text { Fixed factory overhead (allocated) } & 18
\end{array}$$ A one-time customer has offered to buy 900 units at a special price of $47 per unit. Assuming that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit (loss) will be generated from the special order?
A)$6,000 loss
B)$4,500 profit
C)$12,500 profit
D)$42,300 profit

Quizplus · Accepted Answer

For the special order, only variable costs (direct materials, direct labor, and variable factory overhead) are relevant because fixed costs will remain unchanged. The variable costs per unit are $24 (direct materials) + $10 (direct labor) + $8 (variable factory overhead) = $42. The special price is $47 per unit, so the profit per unit is $47 - $42 = $5. For 900 units, the additional profit is 900 units * $5/unit = $4,500.

Menagerie Products Had the Following Unit Costs A One-Time Customer Has Offered to Buy 900 Units at r