Briny Sail Makers manufactures sails for sailboats.The company has the capacity to produce 35,000 sails per year and is currently producing and selling 30,000 sails per year.The following information relates to current production:

The fixed manufacturing costs increase by $102,000 for every 500 units produced beyond the maximum capacity of the plant.If a special pricing order is accepted for 5500 sails at a sales price of $160 per unit,and if the order requires no variable or fixed selling and administrative costs,what is the effect on operating income?

Question

Briny Sail Makers manufactures sails for sailboats.The company has the capacity to produce 35,000 sails per year and is currently producing and selling 30,000 sails per year.The following information relates to current production:

The fixed manufacturing costs increase by $102,000 for every 500 units produced beyond the maximum capacity of the plant.If a special pricing order is accepted for 5500 sails at a sales price of $160 per unit,and if the order requires no variable or fixed selling and administrative costs,what is the effect on operating income?

Quizplus · Accepted Answer

A)
 11ea86ed_2af0_3e5c_8b27_d5eee668d265_TB3056_00 Variable costs:
 11ea86ed_2af0_3e5d_8b27_5dc09c7f0c1f_TB3056_00 Fixed costs:
 11ea86ed_2af0_656e_8b27_ab299ccd269f_TB3056_00

Briny Sail Makers Manufactures Sails for Sailboats