Question
Harris Company has a current production level of 20,000 units per month. Unit costs at this level are: Direct materials $0.25 Direct labor 0.40 Variable
Harris Company has a current production level of 20,000 units per month. Unit costs at this level are:
| Direct materials | $0.25 |
| Direct labor | 0.40 |
| Variable overhead | 0.15 |
| Fixed overhead | 0.20 |
| Marketing - fixed | 0.20 |
| Marketing/distribution - variable | 0.40 |
Current monthly sales are 18,000 units. Jimi Company has contacted Harris Company about purchasing 1,500 units at $2.00 each. Current sales would not be affected by the one-time-only special order, and variable marketing/distribution costs would not be incurred on the special order. What is Harris Company's change in operating profits if the special order is accepted?
| A. | $400 decrease in operating profits | |
| B. | $400 increase in operating profits | |
| C. | $1,800 decrease in operating profits | |
| D. | $1,800 increase in operating profits |
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