Answer:
Increases by $66,800.
Explanation:
Given that,
Direct materials = $ 200
Direct labor = 80
Manufacturing overhead (30% variable) = 150
Selling expenses (50% variable) = 50
Administrative expenses (10% variable) = 80
Total per unit = $560
If accept this offer,
Total cost:
= Material + Labor + Manufacturing overhead + Administrative
= $200 + $80 + (30% × 150) + (10% × 80)
= $200 + $80 + $45 + $8
= $333
Contribution margin per unit:
= Selling price - Variable cost
= $500 - $333
= $167
Increase in profits:
= Contribution margin per unit × Number of units offer to purchase
= $167 × 400 units
= $66,800