• Fox, Inc. manufactures and sells pens for $7 each. Walton Corp. has offered Fox, Inc. $3 per pen for a one-time order of 3,500 pens. The total manufacturing cost per pen, using absorption costing, is $1 per unit and consists of variable costs of $0.75 per pen and fixed overhead costs of $0.25 per pen. Assume that Fox, Inc. has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special pricing order?

increase of $14,000

decrease of $14,000

increase of $7,875

decrease of $7,875