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  3. pilot produces gloves which it sells for $35. the

Pilot produces gloves which it sells for $35. The company produces 16,000 pairs of these...

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Accounting

Pilot produces gloves which it sells for $35. The company produces 16,000 pairs of these gloves annually but has the capacity to produce 20,000. An order for manufacturing and selling 1,000 pairs at $25 has been received from a big-box home improvement retailer that would not disrupt current operations. Current costs for the gloves are as follows:

Direct materials $ 6.00 Direct labor 10.00 Variable overhead 3.00 Fixed overhead 8.00 Total $27.00

In addition, the retailer would like to add its orange and white logo to each pair which would require an additional $2 per pair of gloves in additional labor costs. Pilot would also have to rent a logo stamper to stamp the logo which would cost $600. Which statement is true with regard to this order?

Incremental costs will be $27,000.

Incremental costs will be $21,600.

Incremental profit will be $4,000.

Incremental costs will exceed incremental revenues by $4,600.

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