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Rovio Suksia, a Finnish company, produces cross-country ski poles that it sells for euro 35 a pair. (The Finnish unit of currency, the euro, is
Rovio Suksia, a Finnish company, produces cross-country ski poles that it sells for euro 35 a pair. (The Finnish unit of currency, the euro, is denoted by euro.) Operating at capacity, the company can produce 60,000 pairs of ski poles a year. Costs associated with this level of production and sales are given below: Required: The Finnish army would like to make a one-time-only purchase of 9,000 pairs of ski poles for its mountain troops. The army would pay a fixed fee of euro 6 per pair, and in addition it would reimburse Rovio Suksia for its unit manufacturing costs (both fixed and variable). Due to a recession, the company would otherwise produce and sell only 51,000 pairs of ski poles this year. (Total fixed manufacturing overhead cost would be the same whether 51,000 pairs or 60,000 pairs of ski poles were produced.) The company would not incur its usual variable selling expenses with this special order. If Rovio Suksia accepts the army's offer, by how much would net operating income increase or decrease from what it would be if only 51,000 pairs of ski poles were produced and sold during the year? in net operating income Assume the same situation as described in requirement (1) above, except that the company is already operating at capacity and could sell 60,000 pairs of ski poles through regular channels. Thus, accepting the army's offer would require giving up sales of 9,000 pairs at the normal price of euro 35 a pair. If the army's offer is accepted, by how much will net operating income increase or decrease from what it would be if the 9,000 pairs were sold through regular channels? in net operating income
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