Kingston Company produces a hover board with a unit variable cost of $100 and a unit selling price of $176. Fixed manufacturing costs were $24,000 when 8,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $150 each. If the company has sufficient capacity to produce these additional units, should Kingston accept the special order?
A) No, because operating income will decrease by $26,000.
B) Yes, because operating income will increase by $26,000.
C) Yes, because operating income would increase by $150,000.
D) Yes, operating income will increase by $50,000.

Question

Quizplus · Accepted Answer

[(Special order price - unit variable cost) x Special order quantity] = Contribution Margin/Operating Income Increase; [($150 - $100) x 1,000] = $50,000

Kingston Company Produces a Hover Board with a Unit Variable