The manager at the Plymouth Manufacturing Company reported a current production level of 22,000 units per month. The managerial accountant reported the following unit-level costs:
Direct materials $0.30
Direct labor 0.45
Variable overhead 0.18
Fixed overhead 0.20
Marketing-fixed 0.20
Marketing/Distribution/Variable 0.40
The manager reported monthly sales of 20,000 units. The Salem Company contacted the manager at Plymouth Manufacturing and inquired about the purchase of 1,525 units at $2.10 per unit. The manager noted that current sales would not be affected by the one-time-only special order, and variable marketing/distribution costs would not be incurred with the special order. What is the change in operating profits at Plymouth Manufacturing Company's if the special order is accepted?
A) $1,525 decrease
B) $1,525 increase
C) $1,784.25 decrease
D) $1,784.25 increase
E) There is no change in operating profits
D
Explanation: D) Explanation: [($0.30 + $0.45 + $0.18 )] = $0.93
[1,525 × ($2.10 - $0.93 )] = $1,784.25 increase
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