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Replica Products (RP) manufactures miniature models of airplanes, trains and automobiles as promotional items...

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Accounting

Replica Products (RP) manufactures miniature models of airplanes, trains and
automobiles as promotional items for corporate customers. A newly formed airline
has approached RP to make 500 models of its new livery (logo design) on a model
Boeing 737, which it will send to travel agencies to serve as a marketing tool. RPs
current per unit cost on Boeing 737 models is direct materials $9; direct labour $6;
variable manufacturing overhead $3; fixed manufacturing overhead $6. Such
models are normally priced at $35.00/unit. Incorporating the new airline's livery
into the production will require an additional cost of $733. As the newly formed
airline is rather cash poor, it is asking RP to make this one-time production run for
$27? unit. Assuming RP has the capacity and other orders would not be affected,
how much total profit would RP earn from this special order?
a. $767
b. $4,500
c. $3,767
d. $5,000
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