Question
The following information relates to current production of outdoor chaise lounges BackyardPosh: Variable manufacturing costs per unit $102.00 Total fixed manufacturing costs $525,000 Variable marketing
The following information relates to current production of outdoor chaise lounges BackyardPosh:
Variable manufacturing costs per unit | $102.00 |
Total fixed manufacturing costs | $525,000 |
Variable marketing and administrative costs per unit | $30.00 |
Total fixed marketing and administrative costs | $250,000 |
The regular selling price per chaise lounge is$300.00. The company is analyzing the opportunity to accept a special sales order for 200 chaise lounges at a price of$200.00 per unit. Fixed costs would increase by$20,000. The company has the capacity to produce15,000 chaise lounges peryear, but is currently producing and selling10,000 chaise lounges per year. Regular sales will not be affected by the special order. If the company were to accept this specialorder, how would operating income increase or decrease by?
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