4) Oak Creek Company uses activity-based costing, and normally produces 1,000,000 units per month. At this level of production, the costs per unit are as follows:

Direct materials used $15

Direct labor $6

Variable indirect production $1

Setup costs $5

For 1,000,000 units, 500 setups are required at a cost of $10,000 per setup. The company has received a special order for 100,000 units at $22 per unit. The company has excess capacity. The company estimates that 5 setups will be required for the special order. Variable selling costs of $1 per unit will also be incurred for the special order. What is the cost of the special order?

A) $2,300,000

B) $2,350,000 this is the right answer. Please explain why!

C) $2,700,000

D) $2,800,000