Sky High Seats manufactures seats for airplanes.The company has the capacity to produce 100,000 seats per year,but currently produces and sells 75,000 seats per year.The following information relates to the current production of the product:

If a special sales order is accepted for 7,000 seats at a price of $350 per unit,and fixed costs remain unchanged,how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order. )

Question

Sky High Seats manufactures seats for airplanes.The company has the capacity to produce 100,000 seats per year,but currently produces and sells 75,000 seats per year.The following information relates to the current production of the product:

If a special sales order is accepted for 7,000 seats at a price of $350 per unit,and fixed costs remain unchanged,how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order. )

Quizplus · Accepted Answer

A)
Variable Mfg.Cost $220
Variable Marketing $50
Total Variable $270
NOW Sales Price $350
Less Total Variable Cost 270
= Contribution Margin $80
Times units sold × 7,000
= Additional Profit $560,000

Sky High Seats Manufactures Seats for Airplanes