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Business, 27.03.2020 04:26 melkumathurin

Black Cat Corp manufactures a product with the following full unit costs at a volume of 4,000 units:
Direct materials $ 200
Direct labor 80
Manufacturing overhead (30% variable) 150
Fixed Selling expenses 50
Administrative expenses (10% variable) 80
Total per unit $560
A company recently approached Black Cat's management with an offer to purchase 450 units for $550 each. Black Cat currently sells the product to dealers for $800 each. Black Cat's capacity is sufficient to produce the extra 450 units. No selling expenses would be incurred on the special order. If Black Cat's management accepts the offer, profits will
1. increase by $97,650
2. decrease by $24,000
3. increase by $66,800
4. decrease by $120,000

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