Question
The ABC Corporation manufactures a single product with the following full unit costs at a volume of 2,000 units: Direct materials $400 Direct labor $160
The ABC Corporation manufactures a single product with the following full unit costs at a volume of 2,000 units:
Direct materials | $400 |
Direct labor | $160 |
Manufacturing overhead (30% variable) | $300 |
Selling expenses (50% variable) | $150 |
Administrative expense (10% variable) | $140 |
Total per unit | $1,150 |
A company recently approached ABC Corporation about buying 200 units for $850. ABC currently sells the models to dealers for $1,300. ABC Corporation's capacity is sufficient to produce the extra 200 units. No incremental (variable) selling expenses would be incurred on the special order.
How much will income change (in the short run) if ABC accepts the special order?
A. Increase by $42,500
B. decrease by $60,000
C. increase by $132,800
D. increase by $37,200
E. None of these answers are correct
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