Costs associated with this level of production

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Reference no: EM13754141

Texas Company produces and sells 22,000 units of a single product. Costs associated with this level of production are as follows:

Direct materials $15 per unit

Direct manufacturing labor $45 per unit

Variable manufacturing overhead $25 per unit

Fixed manufacturing overhead $40 per unit

Variable selling costs $10 per unit

The product normally sells for $160 per unit. Texas Company has received a special order to sell 2,000 units at $120 per unit. With the special order, variable selling costs will increase by $5 per unit to $15 per unit. Texas Company has excess production capacity.

Required:

Compute the amount by which the operating income of Texas Company would change if the special order was accepted.

Reference no: EM13754141

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