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Business
Operations Management
oody Company manufactures slippers and sells them at $10 a pair. Variable manufacturing costs are $4.50 a pair, and allocated fixed manufacturing costs are $1.50 a pair. It has enough idle capacity available to accept a one-time-only special order of 20,000 pairs of slippers at $6 a pair. Woody will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales?

oody Company manufactures slippers and sells them at $10 a pair. Variable manufacturing costs are $4.50 a pair, and allocated fixed manufacturing costs are $1.50 a pair. It has enough idle capacity available to accept a one-time-only special order of 20,000 pairs of slippers at $6 a pair. Woody will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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  1. The Woody Company manufactures slippers and sells them at $10 a pair. Variable

manufacturing costs are $4.50 a pair, and allocated fixed manufacturing costs

are $1.50 a pair. It has enough idle capacity available to accept a one-time-only

special order of 20,000 pairs of slippers at $6 a pair. Woody will not incur any

marketing costs as a result of the special order. What would the effect on operating

income be if the special order could be accepted without affecting normal sales?

(a) $0, (b) $30,000 increase, (c) $90,000 increase, (d) $120,000 increase

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