Sprint Company makes special equipment used in cell towers. Each unit sells for $400. Sprint uses just-in-time inventory procedures; it produces and sells 12,500 units per year. It has provided the following income statement data: A foreign company has offered to buy 100 units for a reduced price of $250 per unit. The marketing manager says the sale will not negatively impact the company's regular sales. The sales manager says that this sale will not require any incremental selling & administrative costs, as it is a one-time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Sprint accepts the deal, how will this impact operating income?

Question

Sprint Company makes special equipment used in cell towers. Each unit sells for $400. Sprint uses just-in-time inventory procedures; it produces and sells 12,500 units per year. It has provided the following income statement data:  A foreign company has offered to buy 100 units for a reduced price of $250 per unit. The marketing manager says the sale will not negatively impact the company's regular sales. The sales manager says that this sale will not require any incremental selling & administrative costs, as it is a one-time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Sprint accepts the deal, how will this impact operating income?

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A)
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Sprint Company Makes Special Equipment Used in Cell Towers