Question
Pillar Company expects to incur the following costs at the planned production level of 10,000 units: Direct materials P100,000 Direct labor 120,000 Variable overhead 60,000
Pillar Company expects to incur the following costs at the planned production level of 10,000 units:
Direct materials
P100,000
Direct labor
120,000
Variable overhead
60,000
Fixed overhead
30,000
The selling price is P50 per unit. The company currently operates at full capacity of 10,000 units. Capacity can be increased to 13,000 units by operating overtime. Variable costs increase by P14 per unit for overtime production. Fixed overhead costs remain unchanged when overtime operations occur. Pillar Company has received a special order from a wholesaler who has offered to buy 1,000 units at P45 each. What is the impact on Pillar's operating income if this special order is accepted?
A. P3,000 increase
B. no change
C. P17,000 increase
D. P5,000 decrease
Answer with explanation/solution please. Thank you.
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