Sky High Seats manufactures seats for airplanes. The company has the capacity to

Question

Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 scats per year, but currently produces and sells 75,000 seats per year. The following information relates to the current production of the product EE (Click the icon to view the data.) If a special sales order is accepted for 7,400 seats at a price of $350 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) O A. Increase by $2,590,000 B. Increase by S296,000 OC. Decrease by $296,000 D. Increase by $4,000,000 Data Table Sale price per unit Varable costs per unit: Marketing and administrative Total foxed costs: Marketing and ad $400 $240 $70 $760,000 $230,000 Print Done

Explanation / Answer

Incremental profit(loss) = 7400*(350-240-70)= $296000 Option B is correct

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