Colortrigon Company makes a variety of paper products.One product is 30 lb copier paper, packaged 3,000 sheets to a box.One box normally sells for $20.A large bank offered to purchase 6,000 boxes at $15 per box.Costs per box are as follows:
No variable marketing costs would be incurred on the order.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable.
Should Colotrigon accept the order?
A) Yes, income will increase by $30,000.
B) Yes, income will increase by $19,000.
C) No, income will decrease by $43,000.
D) No, income will decrease by $86,000.
E) It doesn't matter; there will be no impact on income.

Question

Colortrigon Company makes a variety of paper products.One product is 30 lb copier paper, packaged 3,000 sheets to a box.One box normally sells for $20.A large bank offered to purchase 6,000 boxes at $15 per box.Costs per box are as follows:  
 No variable marketing costs would be incurred on the order.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable.
Should Colotrigon accept the order?
A) Yes, income will increase by $30,000. 
B) Yes, income will increase by $19,000. 
C) No, income will decrease by $43,000. 
D) No, income will decrease by $86,000. 
E) It doesn't matter; there will be no impact on income.

Quizplus · Accepted Answer

Yes, Colortrigon will make $30,000 if the order is accepted.
Increase in operating income = Selling price - Direct materials - Direct labor - Variable overhead
Increase in operating income = ($15 - $6 - $2 -$2) × 6,000 boxes = $30,000

Colortrigon Company Makes a Variety of Paper Products