Martin Incorporated provided the following information regarding its only produc

Question

Martin Incorporated provided the following information regarding its only product Sale price per unit Direct materials used Direct labor incurred Variable manufacturing overhead Variable selling and administrative expenses Fixed manufacturing overhead Fixed selling and administrative expenses Units produced and sold $50.00 $160,000 $188,000 $124,000 $75,000 $65,000 $12,000 23,000 Assume no beginning inventory Assuming there is excess capacity, what would be the effect on operating income of accepting a special order for 1,000 units at a sale price of $49 per product? The O A. Decrease by $28,480 O B. Increase by $20,520 ° C. Decrease by S20520 O D. Increase by $28,480

Explanation / Answer

variable cost per unit Direct materials used 160,000 direct labor incurred 188,000 variable manufacturing overhead 124,000 total variable cost 472,000 units produced 23,000 variable cost per unit 20.52 contribution margin per unit = 49-23.78261= 28.48 Special order total contribution   1000*28.48= 28480 answer - option D    increase by $28,480

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