Rexeleg Company manufactures a product with the following costs per unit at the expected production of 40,000 units:
The company has the capacity to produce 50,000 units.The product regularly sells for $50.A wholesaler has offered to pay $43 per unit for 3,000 units.

If the firm chooses to accept the special order and reject some regular sales, the effect on operating income would be a:
A) $30,000 increase.
B) $21,000 decrease.
C) $64,000 increase.
D) $45,000 decrease.

Question

Rexeleg Company manufactures a product with the following costs per unit at the expected production of 40,000 units:  
 The company has the capacity to produce 50,000 units.The product regularly sells for $50.A wholesaler has offered to pay $43 per unit for 3,000 units.
 
If the firm chooses to accept the special order and reject some regular sales, the effect on operating income would be a:
A) $30,000 increase. 
B) $21,000 decrease. 
C) $64,000 increase. 
D) $45,000 decrease.

Quizplus · Accepted Answer

The effect on operating income = 3,000 units × ($50 - $43) = $21,000 decrease

Rexeleg Company Manufactures a Product with the Following Costs Per