Question

If a special sales order is accepted for 3,000 sails at a price of $75 per unit, fixed costs remainunchanged, and there are no additional variable marketing and administrative costs for this order,what is the change in operating income?

Answer 1

Question Completion:

We assume that the variable manufacturing cost is $55 per unit.

Answer:

The change in operating income = $60,000

Step-by-step explanation:

a) Data and Calculations:

Special order = 3,000 units

Price of special order = $75 per unit

Variable cost per unit (assumed) = $55

Fixed costs = unchanged

Variable marketing and administrative costs = unchanged

The change in operating income = $60,000 (($75 - $55) * 3,000)

b) Given the above scenario and the assumed variable cost per unit of $55, the change in operating income will be a total of $60,000, which adds to the normal business of the company.