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How much will operating profit change

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Question - Sports Specialty Inc. produces a bicycle that it normally sells wholesale for $250 per bike. The variable costs of production are $169 and the fixed cost for this product line is $164,000 per month. The company has been selling this product at a rate of 2,000 units per month. The company has received an order for 1,100 bikes at a price of $190 per bike. The order is to ship to a market where the company has no business, so it is believed it will not adversely affect existing business. The company has the capacity to produce the special order. How much will operating profit change if Sports Specialty accepts this order?

  • decrease of $22,000
  • decrease of $23,100
  • increase of $22,000
  • increase of $23,100

Reference no: EM131701450

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