Consider the Following Decision Option Data What Is the Incremental Profit for Option #2?
A)$5,600
B)($2,400)

question 39

Multiple Choice

Consider the following decision option data: $\begin{array}{lll}&\text { Option \#1 } & \text { Option \#2 } \\\text { Number of units } & 150 & 200 \\\text { Revenue per unit } & \$ 25 & \$ 25 \\\text { Variable cost per unit } & \$ 12 & \$ 12 \\\text { Lost revenue from choosing option } & \{\$ 500\} & \{\$ 4,000\} \\\text { Cost savings from choosing option } & \$ 0 & \$ 1,000 \\\text { Avo idable fixed cost } & \$ 0 & \$ 0\end{array}$ What is the incremental profit for Option #2?

• A)$5,600
• B)($2,400)
• C)$2,600
• D)($400)
• E)$1,400

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Definitions:

Discount Lost

The additional expense a company incurs when it fails to take advantage of the payment terms offered by suppliers, like missing early payment discounts.

Gross Method

Accounting treatment for purchase discounts where discounts are not considered until actually taken.

Note Payable

A promissory note from the maker’s point of view.

Interest Accrued

The accumulation of interest on a loan or bond that has been earned but not yet paid.