Question

If a special sales order is accepted for​ 3,000 seats at a price of​ $330 per​ unit, and fixed costs increase by​ $13,000, how would operating income be​ affected? (NOTE: Assume regular sales are not affected by the special​ order.) A. Increase by​ $227,000 B. Increase by​ $77,000 C. Increase by​ $90,000 D. Decrease by​ $77,000

Answer 1

B) Increase by​ $77,000

Step-by-step explanation:

variable costs per unit:

manufacturing $250

mktg. and adm. $50

total $300

contribution margin per unit = sales price - total variable costs = $330 - $300 = $30

if the special is accepted, operating income will increase by = ($30 contribution margin per seat x 3,000 seats) - $13,000 increase in fixed costs = $90,000 - $13,000 = $77,000