Question

The following information relates to the Magna Company for the upcoming year, based on 402,000 units. Amount $6,432,000 4,422,080 2,010,000 361.800 $1,648,200 Per Unit $16.00 11.00 5.9P Sales Cost of goods sold Gross margin Operating expenses Operating profits The cost of goods sold includes $1.260,000 of fixed manufacturing overhead; the operating expenses include $106.000 of fixed marketing expenses. A special order offering to buy 50.000 units for $10.65 per Magna. Fortunately, there will be no additional operating expenses associated with the order and Magna has sufficient capacity to handle the order. How much will operating profits be increased if Magna accepts the special order? Multiple Choice 0 $32500 0 $107.500 e $70,000

Answer 1

Answer is 107500

Workings are attached below

SHREE Date: 1 1 Page No. per unit Computation of Variable cost Cost of goods sold = (-) fixal manufa dun acor Venable cast of goods sold - Number of units 260,600 4422,000 (1260.000) 2. 66,600 4,422,000 manufa during acahead. A - 3162coc 402000 7.865 parunit B) Operating expenses - fixed operating expenses Vanable oporabng expenses Per unit (255800 + 402000) 361800 Ciocoas) 25580 C 0.636 As the new offer of 50000 units will require no additional operating expenses Only manufacturing expenses (variable) with the incored and variable operating expenso will be inance. - Total cost of produring = 50000 x (7.865to.B01 Soooo unit = 3932 y 425000 Total revenue from 50000 unit= 50000 x 10.65 - - 532500 i Profits from 50000 unit = 532500 - 425000 _ =10750 a