cvg.cengagenow.com/ilrn/takeAssignment/takeAssignmentMaindo marks Ford Pinto Fue

Question

cvg.cengagenow.com/ilrn/takeAssignment/takeAssignmentMaindo marks Ford Pinto Fuel Tank. New Tab Now #9 ns b The normal selling price of Carla Company's product is $3.00 per unit. The costs of production are: direct materials, So.ao; direct bbor, So.so; variable overbead, So.4o; and fixed overhead So.60 (based on normal capacity).The company has received a special order for 8,00o units at a unit sales price of St.oo. There is ample unused capacity to fill the order. If the order is accepted, operating income will a. increase by $2,400. O b. increase by 53,600. O c. Increase by $8,000. d. decrease by $2.400.

Explanation / Answer

Decrease by $2400

The cost of producing 8000 units = (0.2 + 0.1 + 0.4 + 0.6) x 8000 = $10400

Sales revenue = $8000

Hence there is a loss of 8000 - 10400 = $2400

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