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Determine the effect on operating income

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Question - Missoula Industries manufactures a product with the following costs per unit at the expected production of 30,000 units:

Direct materials $5

Direct labor 15

Variable manufacturing overhead 8

Fixed manufacturing overhead 6

The company has the capacity to produce 60,000 units. The product regularly sells for $45. A wholesaler has offered to pay $40 each for 2,000 units.

If Missoula is at capacity and the special order is accepted, determine the effect on operating income (profit)?

A. $24,000 increase

B. $12,000 decrease

C. $10,000 decrease

D. $34,000 increase

Reference no: EM132567338

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