Cochran Corporation has a plant capacity of 100,000 units per month. Unit costs at capacity are:

ACCOUNTING

Multiple Choice

Cochran Corporation has a plant capacity of 100,000 units per month. Unit costs at capacity are:

Direct materials $4.00

Direct labor 6.00

Variable overhead 3.00

Fixed overhead 1.00

Marketing - fixed 7.00

Marketing/distribution - variable 3.60



Current monthly sales are 95,000 units at $30.00 each. Suzie, Inc., has contacted Cochran Corporation about purchasing 2,000 units at $24.00 each. Current sales would not be affected by the one-time-only special order. What is Cochran’s change in operating profits if the one-time-only special order is accepted?

a. $14,800 increase

b. $17,200 increase

c. $22,000 increase

d. $33,200 increase


Click here for the SOLUTION