The effect on operating income of accepting a special order

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Reference no: EM131755241

Samson Incorporated provided the following information regarding its only product:

Sale price per unit

$50.00

Direct materials used

$160,000

Direct labor incurred

$185,000

Variable manufacturing overhead

$120,000

Variable selling and administrative expenses

$70,000

Fixed manufacturing overhead

$65,000

Fixed selling and administrative expenses

$12,000

Units produced and sold

20,000

Assume no beginning inventory

Assuming there is excess capacity, what would be the effect on operating income of accepting a special order for 1,200 units at a sale price of $47 per product? The 1,200 units would not require any variable selling and administrative expenses. (NOTE: Assume regular sales are not affected by the special order.)

A. Increase by $28,500

B. Decrease by $28,500

C. Increase by $24,300

D. Increase by $84,300

Reference no: EM131755241

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