Reference no: EM132514900

Black Horse Corporation manufactures a product with the following full unit costs at a volume of 2,000 units:

Direct materials                                          $ 100

Direct labor                                                   40

Manufacturing overhead (30% variable)               75

Selling expenses (50% variable)                        25

Administrative expenses (10% variable)               40

Total per unit                                                  $280

• A company recently approached Black Horse's management with an offer to purchase 225 units for $275 each. Black Horse currently sells the product to dealers for $400 each. Black Horse's capacity is sufficient to produce the extra 225 units. No selling expenses would be incurred on the special order.

Question 1: If Black Horse's management accepts the offer, profits will