Voyage Sail Makers manufactures sails for sailboats. The company has the capacit
ID: 2570675 • Letter: V
Question
Voyage Sail Makers manufactures sails for sailboats. The company has the capacity to produce 37,000 sails per year and is currently producing and selling 30,000 sails per year. The following information relates to current production: $180 Sales price per unit Variable costs per unit $60 $10 Manufacturing Selling and administrative Total fixed costs: S675,000 300,000 Manufacturing Selling and administrative If a special pricing order is accepted for 5,500 sails at a sales price of $150 per unit, and fixed costs remain unchanged, what is the change in operating income? (Assume the special pricing order will require variable manufacturing costs and variable selling and administrative costs.) A. Operating income decreases by $440,000 O B. Operating income decreases by $825,000 C. Operating income increases by $825,000 0 D. Operating income increases by $440,000Explanation / Answer
The correct answer is D. Operating Income increase by $ 440,000
Note:
Hence Increase = $ 2,765,000 - $ 2,325,000
= $ 440,000
Existing New Order Total Units 30,000 5,500 35,500 Per Unit Total Per Unit Total Selling Price 180 150 Variable Cost Manufacturing 60 60 Selling and Administrative 10 10 Contribution Margin 110 3,300,000 80 440,000 3,740,000 Fixed Costs Manufacturing 675,000 675,000 Selling and Administrative 300,000 300,000 Net Operating Income 2,325,000 2,765,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.