Question - The MNK Company has gathered the following information for a unit of its most popular product:
Direct materials $6
Direct labor $3
Overhead (40% variable) $5
Cost to manufacture $14
Desired markup (50%) $7
Target selling price $21
The above cost information is based on 4,000 units. A foreign distributor has offered to buy 1,000 units at a price of $16 per unit. This special order would not disturb regular sales. Variable shipping and other selling expenses would be an additional $1 per unit for the special order. If the special order is accepted, MNK's operating profits will increase by:
A. $1,000.
B. $2,000.
C. $4,000.
D. $5,000.