ABC Company has received a request for a special order of 6,000 units of product A for $21.20 each. Product A's unit product cost is $16.20, determined as follows: $6.10 Direct materials $4.20 Direct labor $2.30 Variable manufacturing overhead $3.60 Fixed manufacturing overhead $16.20 Unit product cost The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample idle capacity for producing the special order. What is the impact on operating income if the special order is accepted? O $26,400 increase O $16,200 decrease O $51,600 increase O $30,600 increase O $5,400 increase

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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ABC Company has received a request for a special order of 6,000 units of product A for $21.20 each.
Product A's unit product cost is $16.20, determined as follows:
$6.10
Direct materials
$4.20
Direct labor
$2.30
Variable manufacturing overhead
$3.60
Fixed manufacturing overhead
$16.20
Unit product cost
The special order would have no effect on the company's total fixed manufacturing overhead costs.
The customer would like modifications made to product A that would increase the variable costs by
$4.20 per unit and that would require an investment of $21,000 in special molds that would have no
salvage value. This special order would have no effect on the company's other sales. The company
has ample idle capacity for producing the special order. What is the impact on operating income if
the special order is accepted?
$26,400 increase
O $16,200 decrease
O $51,600 increase
O $30,600 increase
O $5,400 increase
Transcribed Image Text:ABC Company has received a request for a special order of 6,000 units of product A for $21.20 each. Product A's unit product cost is $16.20, determined as follows: $6.10 Direct materials $4.20 Direct labor $2.30 Variable manufacturing overhead $3.60 Fixed manufacturing overhead $16.20 Unit product cost The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample idle capacity for producing the special order. What is the impact on operating income if the special order is accepted? $26,400 increase O $16,200 decrease O $51,600 increase O $30,600 increase O $5,400 increase
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