Comics Plus has a current production level of 200,000 comics per month. Unit costs at this level are:
Current monthly sales are 180,000 units. Printers Ltd. has contacted Comics Plus about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order, and variable marketing/distributing costs would not be incurred on the special order.
What is Comics Plus' change in profits if the order is accepted?
A) $6,000 increase
B) $6,000 decrease
C) $7,500 increase
D) $9,000 increase
E) $3,000 increase

Question

Comics Plus has a current production level of 200,000 comics per month. Unit costs at this level are:
 Current monthly sales are 180,000 units. Printers Ltd. has contacted Comics Plus about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order, and variable marketing/distributing costs would not be incurred on the special order.
What is Comics Plus' change in profits if the order is accepted?
A) $6,000 increase 
B) $6,000 decrease 
C) $7,500 increase 
D) $9,000 increase 
E) $3,000 increase

Quizplus · Accepted Answer

Relevant variable cost per unit = $0.125 + $0.20 + $0.075 = $0.40
15,000 × ($1.00 - $0.40) = $9,000 increase

Comics Plus Has a Current Production Level of 200,000 Comics