3

The following information relates to the Magna Company for the upcoming year.

	Amount				Per Unit
Sales	$	4,000,000			$	10.00
Cost of goods sold		3,200,000				8.00
Gross margin		800,000				2.00
Operating expenses		300,000				.75
Operating profits	$	500,000			$	1.25

The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed marketing expenses. A special order offering to buy 50,000 units for $7.50 per unit has been made to Magna. Fortunately, there will be no additional operating expenses associated with the order and Magna has sufficient capacity to handle the order. How much will operate profits be increased if Magna accepts the special order?

$25,000.

$62,500.

$100,000.

$125,000.