Homework Answers
Answer: The correct answer is -$1,000
Incremental Variable Cost = Units * (Direct Material + Direct
Labor + Variable Overhead)
Incremental Variable Cost = 2,000 * ($5 + $6 + $7)
Incremental Variable Cost = 2,000 * $18
Incremental Variable Cost = $36,000
Incremental Revenue = Unit * Special Unit Price
Incremental Revenue = 2,000 * $20
Incremental Revenue = $40,000
Incremental Profit = Incremental Revenue – Incremental Variable
Cost – Incremental Shipping Cost
Incremental Profit = $40,000 - $36,000 - $5,000
Incremental Profit = -$1,000
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