Widget Inc. manufactures widgets. The company has the capacity to produce 100,000 widgets per year,...
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Widget Inc. manufactures widgets. The company has the capacity to produce 100,000 widgets per year, but it currently produces and sells 75,000 widgets per year. The following information relates to current production:
Sales price per unit
$40
Variable costs per unit:
Manufacturing
$22
Marketing and administrative
$7
Total fixed costs:
Manufacturing
$78,000
Marketing and administrative
$20,000
If a special sales order is accepted for 5,800 widgets at a price of $40 per unit, fixed costs remain unchanged, and no variable marketing and administrative costs will be incurred for this order, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)
A. Increase by $232,000
B. Decrease by $104,400
C. Increase by $104,400
D. Increase by $63,800
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