Question
The manufacturing capacity of Jordan Company's facilities is 30,000 units a year. A summary of operating results for last year follows: Sales (18,000 units @
The manufacturing capacity of Jordan Company's facilities is 30,000 units a year. A summary of operating results for last year follows:
| Sales (18,000 units @ $100) | $1,800,000 |
| Variable Costs | $954,000 |
| Contribution Margin | $846,000 |
| Fixed Costs | $495,000 |
| Operating Income | $351,000 |
A foreign distributor has offered to buy 14,000 units at $90 per unit next year. Jordan expects its regular sales next year to be 18,000 units. If Jordan accepts this offer and rejects some business from regular customers so as not to exceed capacity, what would be the change in total operating income of accepting the special order? (Assume that the total fixed costs would be the same no matter how many units are produced and sold.)
Multiple Choice
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Increase of $414,000.
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Increase of $424,000.
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Decrease of $390,000.
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Decrease of $444,000.
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