Benjamin Company had the following results of operations for the past year: Sales (16,000 units at $10) $160,000 Direct materials and direct labor$96,000 Overhead (20% variable) 16,000 Selling and administrative expenses (all fixed) 32,000 (144,000) Operating income $16,000 A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300. Assuming Benjamin has excess capacity and accepts the offer, its profits will:
A. Increase by $4,300.
B. Decrease by $6,000.
C. Increase by $30,000.
D. Increase by $5,200.
E. Increase by $6,000.
Answer: A
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