Question

A foreign company has offered to buy 85 units for a reduced sales price of​ $350 per unit. The marketing manager says the sale will not affect the​ company's regular sales. The sales manager says that this sale will require variable selling and administrative costs. The production manager reports that it would require an additional​ $30,000 of fixed manufacturing costs to accommodate the specifications of the buyer. If Belfry accepts the​ deal, how will this impact operating​ income? (Round any intermediate calculations to the nearest​ cent, and your final answer to the nearest​ dollar.)

Answer 1

Option b is correct

Step-by-step explanation:

The computation of the impact in the operating income is given below:

Sale price per unit 350

Less: variable cost per unit -94.49

Contribution margin per unit 255.51

multiplied by units 85

Total contribution margin 21718

Less fixed cost -$30,000

Increase or decrease in operating income $8,282

The variable cost should be

Manufacturing 900,000

Add: selling & admin 300,000

Total 1,200,000

Divided by no of units 127

Variable cost per unit 94.49