Saltwater Sail Makers manufactures sails for sailboats. The company has the capa

Question

Saltwater Sail Makers manufactures sails for sailboats. The company has the capacity to produce 36,000 sails per year and is currently producing and selling 25,000 sails per year. The following information relates to current production: $180 Sales price per unit Variable costs per unit Manufacturing 522 Selling and administrative Total fixed costs: S675,000 5300,000 Manufacturing Selling and administrative Assume that a special pricing order is accepted for 5,600 sails at a sales price of $140 per unit. This special order requires both variable manufacturing and variable selling and administrative costs, as well as incremental fixed costs of 5400,000. What will be the impact on operating income? O A. Operating income decreases by $75,200 O B. Operating income increases by $324,800. O C. Operating income decreases by $324,800 0 D. Operating income increases by S75.200

Explanation / Answer

revenue 5600*140 $ 784,000.00 Variable costs Manufacturing 5600*60 $ 336,000.00 selling and administration 5600*22 $ 123,200.00 total variable cost $ 459,200.00 fixed cost Incremental fixed cost $ 400,000.00 operating income 784000-459200-400000 $ (75,200.00) operating income will decrese by $75,200

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