Texas Company produces and sells 22,000 units of a single product. Costs associa

Question

Texas Company produces and sells 22,000 units of a single product. Costs associated with this level of production are as follows:

Direct materials $15
Direct manufacturing labor 45
Variable manufacturing overhead 25
Fixed manufacturing overhead 40
Total $124

The product normally sells for $160 per unit. Texas Company has received a special order to sell 2,000 units at $120 per unit. Texas Company has excess production capacity.

Required:

Compute the amount by which the operating income of Texas Company would change if the order were accepted.

Explanation / Answer

30,000 Greek - assuming that product cost includes direct expenses and variable overhead

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