Spirit Company makes special equipment used in cell towers.Each unit sells for $400.Spirit produces and sells 12,500 units per year.They have provided the following income statement data: A foreign company has offered to buy 85 units for a reduced sales price of $350 per unit.The marketing manager says the sale will not affect the company's regular sales.The sales manager says that this sale will require additional selling and 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 Spirit accepts the deal,how will this impact operating income? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Question

Spirit Company makes special equipment used in cell towers.Each unit sells for $400.Spirit produces and sells 12,500 units per year.They have provided the following income statement data:  A foreign company has offered to buy 85 units for a reduced sales price of $350 per unit.The marketing manager says the sale will not affect the company's regular sales.The sales manager says that this sale will require additional selling and 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 Spirit accepts the deal,how will this impact operating income? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Quizplus · Accepted Answer

A)
 11ea86d6_8292_bf90_92b6_05891a5c76d7_TB2804_00 Less: expected increase in costs
 11ea86d6_8292_e6a1_92b6_d5bf0078fae8_TB2804_00 *Variable manufacturing cost per unit = 900,000 / 12,500 = $72.00
**Variable selling and administrative expenses per unit = 300,000 / 12,500 = $24.00

Spirit Company Makes Special Equipment Used in Cell Towers