Faukland traders has given the following information for a unit of its most popular product: Direct materials 8 Direct labor 3 Overhead (40% variable) 5 Cost to manufacture 16 Desired markup (50%) 8 Target selling price 24 The above cost information is based on 4,200 units. A foreign distributor has offered to buy 1,200 units at a price of 18 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional 1 per unit for the special order. If the special order is accepted, its operating profits will increase by: а. 1,200 b. 1,920 c. 2,400 d. 4,800

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Faukland traders has given the following information for a unit of its most popular product:
Direct materials
8
Direct labor
3
Overhead (40% variable)
5
Cost to manufacture
16
Desired markup (50%)
8
Target selling price
24
The above cost information is based on 4,200 units. A foreign distributor has offered to buy 1,200
units at a price of 18 per unit. This special order would not disturb regular sales. Variable shipping
and other selling expenses would be an additional 1 per unit for the special order. If the special order
is accepted, its operating profits will increase by:
а. 1,200
b. 1,920
с. 2,400
d. 4,800
Transcribed Image Text:Faukland traders has given the following information for a unit of its most popular product: Direct materials 8 Direct labor 3 Overhead (40% variable) 5 Cost to manufacture 16 Desired markup (50%) 8 Target selling price 24 The above cost information is based on 4,200 units. A foreign distributor has offered to buy 1,200 units at a price of 18 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional 1 per unit for the special order. If the special order is accepted, its operating profits will increase by: а. 1,200 b. 1,920 с. 2,400 d. 4,800
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