Question

Black Horse Corporation manufactures a product with the following full unit costs at a volume of 2000 units:

Answer 1

Answer:

D. Increase by $24,412.50

Explanation:

The computation of the increase in profit is shown below:

= Number of units for purchase × contribution margin per unit

where,

Number of units for purchase is  225 units

And, the contribution margin per unit = Selling price per unit - variable cost per unit

The selling price per unit is $275

And, the variable cost per unit is

= $100 + $40 + $75 × 30% + $25 × 50% + $40 × 10%

= $100 + $40 + $22.5 + $4

= $166.50

So, the contribution margin per unit is

= $275 - $166.50

= $108.50 per unit

So, the increase in profit is

= 225 units × $108.50

= $24,412.50