27) Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-

only special order for a product similar to one offered to domestic customers. The company

has excess capacity. The following per unit data apply for sales to regular customers:

Variable costs:

Direct materials

$130

Direct labor

60

Manufacturing support

105

Marketing costs

95

Fixed costs:

Manufacturing support

175

Marketing costs

65

Total costs

630

Markup (50%)

315

Targeted selling price

$945

What is the change in operating profits if the one-time-only special order for 1,030 units is

accepted for $550 a unit by Crandle?

A) $164,800 increase in operating profits

B) $164,170 increase in operating profits

C) $164,170 decrease in operating profits

D) $164,800 decrease in operating profits

Answer:

A

Explanation:

Contribution margin per unit = $550 - ($130 + $60 + $105 + $95) = $160

Change in operating profit = 1,030 $160 = $164,800 increase

My Question: Why is there an increase in operating profits?