Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but currently produces and sells 75,000 seats per year. The following information relates to current production of seats:Sale price per unit$420Variable costs per unit:Manufacturing$260Marketing and administrative$40Total fixed costs:Manufacturing$770,000Marketing and administrative$200,000If a special sales order is accepted for 4000 seats at a price of $375 per unit, fixed costs remain unchanged, and no variable marketing and administrative costs will be incurred for this order, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Question 30 options: Increase by $300,000 Increase by $460,000 Increase by $2,540,000 Decrease by $460,000

Increase (decrease) in operating income = (Sale price per unit for special order - Variable…

Answered: Sky High Seats manufactures seats for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but currently produces and sells 75,000 seats per year. The following information relates to current production of seats:

Sale price per unit	$420

Variable costs per unit:
Manufacturing	$260
Marketing and administrative	$40

Total fixed costs:
Manufacturing	$770,000
Marketing and administrative	$200,000

If a special sales order is accepted for 4000 seats at a price of $375 per unit, fixed costs remain unchanged, and no variable marketing and administrative costs will be incurred for this order, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

Question 30 options:

	Increase by $300,000
	Increase by $460,000
	Increase by $2,540,000
	Decrease by $460,000

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