FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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