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Managerial Accounting

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Moderate

Incremental Profit

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Chipper Enterprises has a capacity of 150,000 units. It is currently producing and selling 140,000 units at \$50 per unit. The cost per unit at the present production level is as follows:

Direct materials -- \$19
Direct labor -- \$11
Variable overhead -- \$6
Fixed overhead -- \$ 9

A special order for 10,000 units has just been received from an out-of-state company offering a price of \$42 per unit. Freight costs of \$2 per unit would be required.

The incremental profit on the order would be:

A

$\$40,000$

B

$\$20,000$

C

$-\$50,000$

D

$\$100,000$