Question
1 (10 marks) ACME Furniture Ltd. makes kitchen tables. The average cost per table is as follows: Direct materials $ 117.00 Direct labour $ 109.00
1 (10 marks) ACME Furniture Ltd. makes kitchen tables. The average cost per table is as follows: Direct materials $ 117.00 Direct labour $ 109.00 Variable manufacturing overhead $ 112.00 Variable selling expenses $ 113.00 Fixed manufacturing overhead $ 57.50 Fixed selling expenses $ 55.50 Each table regularly sells for $488.00. A special order has been received from a customer for 30,400 tables at $48.80 below the regular selling price. If this special order is accepted, the direct material cost will be $23.40 greater per table than for regular sales. The variable selling expenses listed above (i.e. $113.00) include a $33.90 sales commission that ACME pays its sales employees. ACME would not need to pay that commission on this special order. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other offer. No additional fixed costs would be necessary. Required: If ACME accepts the special order, by how much will operating income change? A) decrease by $3,475,240 B) decrease by $1,726,720 C) decrease by $29,020 D) decrease by $3,474,720 E) decrease by $1,787,520 F) decrease by $1,070,080 G) decrease by $39,520
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