Overhead per unit = $5
Variable overhead = 40%
= 5 x 40%
= $2
| Evaluation of Special Order | |
| Sales ( 1,400 x 20) | 28,000 |
| Expenses: | |
| Direct materials ( 1,400 x 10) | -14,000 |
| Direct labor ( 1,400 x 3) | -4,200 |
| Variable overhead ( 1,400 x 2) | -2,800 |
| Shipping expense ( 1,400 x 1) | -1,400 |
| Net operating profit | $5,600 |
If the special order is accepted, Minton's operating profits will increase by $5,600.
Fourth option is correct option.
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