Marginal Costing Profit Calculation Steps:

• Compute contribution per batch: selling price $12 minus variable cost$4 = $8.
• Total contribution for 125 batches: 125 × $8 =$1,000.
• Determine total fixed costs: $3 per batch × normal 100 batches =$300.
• Profit = total contribution $1,000 minus fixed costs$300 = $700.

Why C is correct:

• Marginal costing profit formula is total contribution minus total fixed costs, treating fixed costs as period expenses regardless of activity level.

Why the others are wrong:

• A: Uses $400 fixed costs ($4 × 100), ignoring the $3 per batch detail for total fixed.
• B: Subtracts variable and fixed per batch costs from selling price without scaling to volume.
• D: Equals total contribution $1,000, omitting fixed cost deduction.

Final answer: C