Sky High Seats manufactures seats for airplanes. The company has the capacity to

Question

Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but currently produces and sells 75,000 seats per year. The following information relates to the current production of the product: Sale price per unit $400 Variable costs per unit Manufacturing Marketing and administrative $260 $70 Total fixed costs: Marketing and administrative $200,000 If a special sales order is accepted for 7,100 seats at a price of $340 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) $760,000 A. O B. O C. OD. Decrease by $71,000 Increase by $2.414,000 Increase by $71,000 Increase by $1,000,000

Explanation / Answer

Answer:

Variable Manufacturing cost per unit= $260
Variable Marketing and Administrative per unit = $70

Total Variable cost per unit= Variable Manufacturing Cost + Variable marketing and administrative
Total Variable cost per unit= $260 + $70
Total Variable cost per unit= $330 per unit

Selling Price per unit =$340 per unit

Contribution margin per unit = Sales per unit – Total Variable cost per unit
Contribution margin per unit= $340 - $330
Contribution Margin per unit= $10 per unit

Operating Income = Sales Unit * Contribution margin per unit
Operating Income = $10 *7,100
Operating Income = $71,000

The operating Income will be increased by $71,000

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.