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Homework Answers
Solution:
Selling price of special order = $40 per unit
Variable cost of special = $35 + $1 = $36 per unit
Contribution margin per unit for special order = $40 - $36 = $4 per unit
Additional fixed costs = $17,000
Increase (Decrease) from Special order = Units*Contribution margin per unit - Additional fixed costs
= 5000*$4 - $17000 = $20000 - $17000 = $3,000 Increase
Hence option "c" is correct.
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