Samson Designers Produces a Lady's Handbag That Normally Sells for $120.The

Multiple Choice

Samson Designers produces a lady's handbag that normally sells for $120.The company produces 800 units annually but has the capacity to produce 1,100 units.An order from a customer has been received for 200 handbags at $85 each that would not disrupt current operations.Current costs for the handbag are as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 23.00 \\\text { Direct labor } & 45.00 \\\text { Variable overhead } & 7.00 \\\text { Fixed overhead } & 12.00 \\\text { Total } & \$ 87.00\end{array}$$ In addition, the customer would like to add a monogram to each bag which would require an additional $4 per bag in additional labor costs.Samson would also have to purchase a piece of equipment to create the monogram which would cost $800.This equipment would not have any other uses.Which statement is true with regard to this situation?

A) Incremental revenues will exceed incremental costs by $400.
B) Incremental revenues will exceed incremental costs by $1,200.
C) Incremental costs will exceed incremental revenues by $1,200.
D) Incremental costs will exceed incremental revenues by $2,000.