1. Ship manufactures sails for sailboats. The company has the capacity to produce 36,000 sails per year and is currently producing and selling 25,000 sails per year. The following information relates to current production:

Sales price per unit	$175
Variable costs per unit:
Manufacturing	$60
Selling and administrative	$10
Total fixed costs:
Manufacturing	$675,000
Selling and administrative	$250,000

If a special pricing order is accepted for 5500 sails at a sales price of $170 per unit, fixed costs remain unchanged, and there are no variable selling and administrative costs for this order, what is the change in operating income?

Select one:

A.

Operating income decreases by $605,000.

B.

Operating income decreases by $550,000.

C.

Operating income increases by $550,000.

D.

Operating income increases by $605,000.