Problem - The following information relates to the Tram Company for the upcoming year.
Amount Per Unit
Sales $4,000,000 $10.00
Cost of Goods Sold 3,200,000 8.00
Gross Margin 800,000 2.00
Operating Expense 300,000 .75
Operating Profits $500,000 $1.25
The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed marketing expenses. A special order offering to buy 50,000 units for $7.50 per unit has been made to Tram. Fortunately, there will be no additional operating expenses associated with the order and Tram has sufficient capacity to handle the order. How much will operate profits be increased if Tram accepts the special order?
a. $25,000
b. $62,000
c. $100,000
d. $125,000