Creative Yachting Fabrics Company manufactures sails for sailboats. The company
ID: 2591808 • Letter: C
Question
Creative Yachting Fabrics Company manufactures sails for sailboats. The company has the capacity to produce 35,000 sails per year, and is currently producing and selling 25,000 sails per year. The following information relates to current production:
Sale price per unit
$175
Variable costs per unit:
Manufacturing
60
Marketing and administrative
20
Total fixed costs:
Manufacturing
$700,000
Marketing and administrative
$300,000
If a special sales order is accepted for 5,500 sails at a price of $150 per unit, and if the order requires both variable manufacturing and variable marketing as well as administrative costs, and incremental fixed costs of $400,000, what will be the impact on operating income?
Sale price per unit
$175
Variable costs per unit:
Manufacturing
60
Marketing and administrative
20
Total fixed costs:
Manufacturing
$700,000
Marketing and administrative
$300,000
Explanation / Answer
Answer:- If a special orderis accepted for 5500 sails the operating income will be decrease by $15000.
The net opreating income of Creative Yachting Fabrics Company will be $1360000 (ie-$1375000 -$15000).
Explanation:-
Creative Yachting Fabrics Company Calulation of net opreating income on 25000 sails Particulars Amount $ Sales value 25000 sails*$175 per unit 4375000 Less:- Variable cost Manufacturing 25000 sails*$60 per unit 1500000 Marketing & administrative 25000 sails*$20 per unit 500000 Contribution 2375000 Less:- Fixed costs Manufacturing 700000 Marketing & administrative 300000 Opreating Income 1375000Related Questions
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