Use the following information for questions
A company's unit costs based on 100,000 units are: $\begin{array}{l}
\text { Variable costs }&\$75 \
\text { Fixed costs }&30
\end{array}$ The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone.
-The incremental profit (loss) from accepting the order would be
A) $30,000.
B) $(150,000).
C) $180,000.
D) $(90,000).

Question

Use the following information for questions 
A company's unit costs based on 100,000 units are: $\begin{array}{l}
\text { Variable costs }&\$75 \
\text { Fixed costs }&30
\end{array}$ The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone.
-The incremental profit (loss) from accepting the order would be
A) $30,000.
B) $(150,000).
C) $180,000.
D) $(90,000).

Quizplus · Accepted Answer

The incremental profit from accepting the order can be calculated by considering the additional revenue and the costs associated with the special order. The special order offers $135 per unit for 5,000 units, totaling $675,000 in revenue. The variable cost for these units is $75 each, totaling $375,000. The fixed costs do not change with this order, so they are not considered in incremental analysis. However, the company loses revenue on 3,000 units of regular sales, which would have sold at $165 each, totaling a loss of $495,000 in revenue. The incremental profit is calculated as the difference between the special order's net revenue and the lost revenue from regular sales: $(5,000 \times \$135) - (5,000 \times \$75) - (3,000 \times (\$165 - \$75)) = \$675,000 - \$375,000 - \$270,000 = \$30,000.$

Use the Following Information for Questions a Company's Unit Variable costs $75 Fixed costs 30\begin{array}{l}\text { Variable costs }&\$75 \\\text { Fixed costs }&30\end{array} Variable costs Fixed costs ​$7530​

Use the Following Information for Questions
a Company's Unit $\begin{array}{l}\text { Variable costs }&\$75 \\\text { Fixed costs }&30\end{array}$