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K Mobile Concepts makes special equipment used in cell towers. Each unit sells for $400. Mobile Concepts uses just-in-time inventory procedures; it produces and sells 12,000 units per year. It has provided the following income statement data Traditional Format Contribution Margin Format Sales revenue Cost of goods sold $4,800,000 Sales revenue $4,800,000 3,200,000 Variable costs: Gross profit 1,600,000 Manufacturing 1,200,000 Selling & admin. expenses 750,000 Selling & admin. Contribution margin Fixed costs: 500,000 3,100,000 Manufacturing 2,000,000 Selling & admin. 250,000 Operating income $850,000 Operating income $850,000 A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact on the company's regular sales. The sales manager says that this sale will not require any variable selling and administrative costs. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Mobile Concepts accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) OA. Operating income will decrease by $27,500. OB. Operating income will increase by $27,500. OC. Operating income will decrease by $16,500. OD. Operating income will increase by $16,500.

K Mobile Concepts makes special equipment used in cell towers. Each unit sells for $400. Mobile Concepts uses just-in-time inventory procedures; it produces and sells 12,000 units per year. It has provided the following income statement data Traditional Format Contribution Margin Format Sales revenue Cost of goods sold $4,800,000 Sales revenue $4,800,000 3,200,000 Variable costs: Gross profit 1,600,000 Manufacturing 1,200,000 Selling & admin. expenses 750,000 Selling & admin. Contribution margin Fixed costs: 500,000 3,100,000 Manufacturing 2,000,000 Selling & admin. 250,000 Operating income $850,000 Operating income $850,000 A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact on the company's regular sales. The sales manager says that this sale will not require any variable selling and administrative costs. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Mobile Concepts accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) OA. Operating income will decrease by $27,500. OB. Operating income will increase by $27,500. OC. Operating income will decrease by $16,500. OD. Operating income will increase by $16,500.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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K Mobile Concepts makes special equipment used in cell towers. Each unit sells for $400. Mobile Concepts uses just-in-time inventory procedures; it produces and sells 12,000 units per year. It has provided the following income statement data Traditional Format Contribution Margin Format Sales revenue Cost of goods sold $4,800,000 Sales revenue $4,800,000 3,200,000 Variable costs: Gross profit 1,600,000 Manufacturing 1,200,000 Selling & admin. expenses 750,000 Selling & admin. Contribution margin Fixed costs: 500,000 3,100,000 Manufacturing 2,000,000 Selling & admin. 250,000 Operating income $850,000 Operating income $850,000 A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact on the company's regular sales. The sales manager says that this sale will not require any variable selling and administrative costs. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Mobile Concepts accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) OA. Operating income will decrease by $27,500. OB. Operating income will increase by $27,500. OC. Operating income will decrease by $16,500. OD. Operating income will increase by $16,500.
Transcribed Image Text:K Mobile Concepts makes special equipment used in cell towers. Each unit sells for $400. Mobile Concepts uses just-in-time inventory procedures; it produces and sells 12,000 units per year. It has provided the following income statement data Traditional Format Contribution Margin Format Sales revenue Cost of goods sold $4,800,000 Sales revenue $4,800,000 3,200,000 Variable costs: Gross profit 1,600,000 Manufacturing 1,200,000 Selling & admin. expenses 750,000 Selling & admin. Contribution margin Fixed costs: 500,000 3,100,000 Manufacturing 2,000,000 Selling & admin. 250,000 Operating income $850,000 Operating income $850,000 A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact on the company's regular sales. The sales manager says that this sale will not require any variable selling and administrative costs. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Mobile Concepts accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) OA. Operating income will decrease by $27,500. OB. Operating income will increase by $27,500. OC. Operating income will decrease by $16,500. OD. Operating income will increase by $16,500.
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