(TCO 5) 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.

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