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What is the incremental impact on profit

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Reference no: EM132725651

Harry Ltd is manufacturing 1,000 units of a product. The present costs and sales data are as follows:

Selling price per unit $10

Variable costs per unit $5

Fixed costs $4,000

The management is considering the following option:

To reduce the production from the current 1,000 units to 800 units and to buy 200 units from the market at $7.50 per unit. Under this option fixed costs would decline by $600.

What is the incremental impact on profit/loss of the company if the above option is taken? Please show all calculations.

Reference no: EM132725651

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