The following information relates to the Magna Company for the upcoming year, based on 490,000 units. Amount Per Unit Sales $ 4,900,000 $ 10.00 Cost of goods sold 3,920,000 8.00 Gross margin 980,000 2.00 Operating expenses 367,500 0.75 Operating profits $ 612,500 $ 1.25 The cost of goods sold includes $1,470,000 of fixed manufacturing overhead; the operating expenses include $122,500 of fixed marketing expenses. A special order offering to buy 86,000 units for $9.30 per unit has been made to Magna. Fortunately, there will be no additional fixed expenses associated with the order and Magna has sufficient capacity to handle the order. How much will operating profits be increased if Magna accepts the special order?
The following information relates to the Magna Company for the upcoming year, based on 490,000 units. Amount Per Unit Sales $ 4,900,000 $ 10.00 Cost of goods sold 3,920,000 8.00 Gross margin 980,000 2.00 Operating expenses 367,500 0.75 Operating profits $ 612,500 $ 1.25 The cost of goods sold includes $1,470,000 of fixed manufacturing overhead; the operating expenses include $122,500 of fixed marketing expenses. A special order offering to buy 86,000 units for $9.30 per unit has been made to Magna. Fortunately, there will be no additional fixed expenses associated with the order and Magna has sufficient capacity to handle the order. How much will operating profits be increased if Magna accepts the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following information relates to the Magna Company for the upcoming year, based on 490,000 units.
| Amount | Per Unit | |
|---|---|---|
| Sales | $ 4,900,000 | $ 10.00 |
| Cost of goods sold | 3,920,000 | 8.00 |
| Gross margin | 980,000 | 2.00 |
| Operating expenses | 367,500 | 0.75 |
| Operating profits | $ 612,500 | $ 1.25 |
The cost of goods sold includes $1,470,000 of fixed manufacturing
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