Luna Company makes special equipment used in cell towers.Each unit sells for $420.Luna produces and sells 12,600 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 variable selling and administrative costs.The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs.If Luna 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

Luna Company makes special equipment used in cell towers.Each unit sells for $420.Luna produces and sells 12,600 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 variable selling and administrative costs.The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs.If Luna 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)
 11ea86ed_2af1_eb13_8b27_e53004abbf69_TB3056_00 Less: expected increase in costs
 11ea86ed_2af2_1224_8b27_9336ae4e3f5b_TB3056_00 *Variable manufacturing cost per unit = 1,000,000 / 12,600 = $79.37
**Variable selling and administrative expenses per unit = 300,000 / 12,600 = $23.81

Luna Company Makes Special Equipment Used in Cell Towers