Sunderson Products, Inc. has received a special order for 1,000 units of a sport-fighting kite....
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Accounting
Sunderson Products, Inc. has received a special order for 1,000 units of a sport-fighting kite. The customer has offered a price of $9.95 for each kite. The unit costs of the kite, at its normal sales level of 30,000 units per year, are detailed below:
The computations are:
Variable production costs $ 5.25
Fixed production costs 2.35
Variable selling costs 0.75
Fixed selling and admin. costs 3.45 T
There is ample idle capacity to produce the special order without any increase in total fixed costs. The variable selling costs on the special order would be $0.15 per unit instead of $0.75 per unit. The special order would have no impact on the company's other sales. What effect would accepting this special order have on the company's net operating income?
Multiple Choice
$1,850 increase
$1,850 decrease
$4,550 increase
$4,550 decrease
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