The Minton Company Has Gathered the Following Information for a Unit

question 37

Multiple Choice

The Minton Company has gathered the following information for a unit of its most popular product:
$$\begin{array} { l r } \text { Direct materials } & \$ 6 \\\text { Direct labor } & 3 \\\text { Overhead (40\% variable) } & 5 \\ \text { Cost to manufacture } & 14 \\\text { Desired markup (50\%) } & 7 \\ \text { Target selling price } & \$ 21 \\\end{array}$$
The above cost information is based on 4,000 units. A foreign distributor 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 an additional $1 per unit for the special order. If the special order is accepted, Minton's operating profits will increase by:

• A) $1,000.
• B) $1,600.
• C) $2,000.
• D) $4,000.

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