CORRECT ANSWER A. GREEN SHOULD ACCEPT THE OFFER OF $280,000 AS...

242.

Correct answer a. Green should accept the offer of $280,000 as it will cover all incremental

costs and increase operating profit.

Selling price

$280,000

Direct material

66,000

Direct labor

120,000

Variable overhead

48,000

(.4 x $120,000)

Administrative costs

12,000

(.1 x $120,000)

Contribution

$ 34,000