Grace Harp Instruments Co. has monthly demand and sales of 125 units. Each unit sells for $500. There is enough capacity to make 130 units per month:

Variable Production Costs:

Direct Materials- $90 Direct Labor- $130 Variable factory overhead- $40

Fixed Production Cost: Equipment depreciation- 30 Factory rent- 44 Other- 20

Total Production cost: 354

Variable selling cost- $28 Fixed Admin Cost- $32

Assume that Grace Harp was evaluating whether it would accept a special sales order for 10 units at $340 per unit. What is the change in operating income if the order is accepted?

Increase of $800 Decrease of $1,200 Increase of $520 Decrease of $540