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A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units:

Direct materials $ 4
Direct labor 10
Variable overhead 8
Fixed overhead 6

A foreign company wants to purchase 1,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $2,000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is:

a. $3,000.

b. $1,000.

c. $(3,000).

d. $(1,000).

Accounting Basics, Accounting

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  • Reference No.:- M947970

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