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1. Jordan Company budgeted sales of 400,000 calculators at $40 per unit last year. Variable manufacturing costs were budgeted at $16 per unit, and fixed
1. Jordan Company budgeted sales of 400,000 calculators at $40 per unit last year. Variable manufacturing costs were budgeted at $16 per unit, and fixed manufacturing costs at $10 per unit. A special order for 40,000 calculators at $23 each was received by Jordan in March. Jordan has sufficient plant capacity to manufacture the additional quantity without incurring any additional fixed manufacturing costs; however, the production would have to be done on an overtime basis at an estimated additional cost of $3 per calculator. Acceptance of the special order would not affect Jordan's normal sales and no selling expenses would be incurred. What would be the effect on net operating income if the special order were accepted? Incremental revenues= 40,000 x $23 = 920,000 Incremental costs = ($16+3)x 40,000 = 760,000 A) $120,000 decrease B) $160,000 increase C) $240,000 decrease D) $280.000 increase
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