Increase in the operating profits

Reference no: EM13156688

The MNK Company has gathered the following information for a unit of its most popular product:

Direct materials $6
direct labor 3
Overhead (40% variable) 5
Cost to manufacture 14
Desired markup (50%) 7
Target selling price 21

The above cost information is based on $4,000 units. A foreign distributer has offered to buy 1,000 units at a price of $16 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be $1 per unit for the special order. If the special order is accepted, MNK's operating profits will increase by:

a. $1,000

b. $1,600

c. $2,000

d. $4,000

e. $5,000

Reference no: EM13156688

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