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Title: In making of special order, the company will incur only variable cost per unit because variable cost ... Post by: needanswersnowp on Feb 28, 2018 3) Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently produces and sells 75,000 seats per year. The following information relates to current production of seats:
Sale price per unit $430 Variable costs per unit: Manufacturing $250 Marketing and administrative $50 Total fixed costs: Manufacturing $770,000 Marketing and administrative $240,000 If a special sales order is accepted for 3000 seats at a price of $330 per unit, and fixed costs increase by $13,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Title: In making of special order, the company will incur only variable cost per unit because variable cost ... Post by: bio_man on Feb 28, 2018 Quantity of special sales order = 3,100 seats
Price Per Seat of Special Sales Order = $330 In making of special order, the company will incur only variable cost per unit because variable cost varies with the production. Fixed Cost associated with the special order is only considered since the fixed cost increase by $15,000 due to special order. [SEE ATTACHMENT] Hence, Option (A) is correct i.e. Operating income would be increased by $109,000 Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you |