Question

Sales (in units)	60,000
Selling price per unit	$25
Manufacturing costs per unit:
Materials	5
Direct labor	4
Overhead
Variable	4
Fixed	6
Total	$19
Gross margin	6
Selling and admin. Expenses per unit	2
Operating income	$4
A company in a foreign market offer to buy and the offer specifies the following data
units to be sold	10,000
price per unit	$12
The incremental profit should be

Answer 1

Manufacturing costs included Fixed cost per unit.This will be not relevant for the calculation of incremental profit.
This is because fixed cost will not change due to offer.
Incremental Profit will only consider incremental cost and revenue.
Sales (in units)					10,000
Sellling Price per unit					$            12
Manufacturing cost per unit:
Materials					5
Direct Labor					4
Overhead:
Variable					4
Total					13
Gross Margin					(1)
Iincremental profit per unit					(1)
Total Incremental profit					(10,000)
Thus incremental profit should be				$     -10,000
Note:
Selling and admin. Expenses is assumed to be fixed expenses.
If Selling and Admini. Expenses is Variable expenses then Incremental profit is calculated as under:
Gross Margin					(1)
Selling and admini. Expense					2
Incremental profit per unit					(3)
Total Incremental Profit			10000*3		$(30,000)