Question
Southern Company manufactures custom paints and sells to Home Depo, Lowes and others. Their current capacity is 60,000 units (gallons of paint) per year and
Southern Company manufactures custom paints and sells to Home Depo, Lowes and others. Their current capacity is 60,000 units (gallons of paint) per year and they are currently producing 60,000 units. The variable cost per unit is $40 and fixed cost are $300,000 per year. Their normal selling price is $80 per unit. Ace Hardware has submitted a special order to Southern for a one time purchase of 10,000 units for at a price of $50 per unit. If Southern accepts this special order they will need to make a one time purchase of a special paint mixing machine and their fixed cost will increase by $5,000. It Southern accepts the special order what would be the impact on their Operating Income (OI)? You should not use any dollar ($) signs when providing your answer but use commas where appropriate.
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