Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units: The company has the capacity to produce 40,000 units. The product regularly sells for £40. A wholesaler has offered to pay £32 a unit for 2,000 units.
If the firm is at capacity and the special order is accepted, the effect on operating income would be

A) a £20,000 increase.
B) a £16,000 decrease.
C) a £4,000 increase.
D) £-0-.

Question

Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units: The company has the capacity to produce 40,000 units. The product regularly sells for £40. A wholesaler has offered to pay £32 a unit for 2,000 units.
If the firm is at capacity and the special order is accepted, the effect on operating income would be

A) a £20,000 increase. 
B) a £16,000 decrease. 
C) a £4,000 increase. 
D) £-0-.

Quizplus · Accepted Answer

The Answer of Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units: The company has the capacity to produce 40,000 units. The product regularly sells for £40. A wholesaler has offered to pay £32 a unit for 2,000 units.
If the firm is at capacity and the special order is accepted, the effect on operating income would be

A) a £20,000 increase. 
B) a £16,000 decrease. 
C) a £4,000 increase. 
D) £-0-.

Gundy Company Manufactures a Product with the Following Costs Per