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 Marketing and administrative $22 $7 Total fixed costs: Manufacturing Marketing and administrative 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 $78,000 $20,000
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 Marketing and administrative $22 $7 Total fixed costs: Manufacturing Marketing and administrative 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 $78,000 $20,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject:- Account
Transcribed Image Text: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
Marketing and administrative
$22
$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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