For the Ages Inc. produces solid-oak umbrella stands that sell for $285 each. The firm has excess capacity. The firms unit costs are as follows:

Material... $50

Direct Labor $40

Variable Overhead $10

Fixed Overhead. $30

The company recently received an offer from the Pentagon for 300 stands; the Pentagon given sequestration can only pay $199 per stand.

What is the effect on net income if this order were accepted?

For the Ages Inc. produces solid-oak umbrella stands that sell for $285 each. The firm has excess capacity. The firms unit costs are as follows:

Material... $50

Direct Labor $40

Variable Overhead $10

Fixed Overhead. $30

The company recently received an offer from the Pentagon for 300 stands; the Pentagon given sequestration can only pay $199 per stand.

What is the effect on net income if this order were accepted?

A) Increase $20,700

B) Increase $29,700

C) $0, as For the Ages Inc. would not accept the offer since the special price ($199) is less than its normal price ($285)

D) Increase $59,700