Score: 0 of 1 pt 8 of 20 (6 complete) Hw Score: 30%, 6 of 20 pts 8.3-17a Questio

Question

Score: 0 of 1 pt 8 of 20 (6 complete) Hw Score: 30%, 6 of 20 pts 8.3-17a Question Help Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently produces and sells 75,000 seats per year. The following information relates to current production of seats Sale price per unit $430 Variable costs per unit: Manufacturing Marketing and administrative $230 560 Total fixed costs: Manufacturing Marketing and adminstaive $770,000 $200,000 If a special sales order is accepted for 3,100 seats at a price of $310 per unit, and fixed costs increase by $14,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) A. O B. O C. Decrease by$48,000 Increase by S48.000 Increase by $234,000 Increase by S62.000 D.

Explanation / Answer

Calculate effect on operating income :

so answer is b) increase by $48000

Incremental revenue (310*3100) 961000 Less: Incremental cost Variable manufacturing cost (3100*230) (713000) Fixed manufacturing cost (14000) Variable marking and administrative (3100*60) (186000) Incremental profit 48000

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