The normal selling price of Carla Company's product is $3.00 per unit.The costs of production are: direct materials,$0.20;direct labor,$0.10;variable overhead,$0.40;and fixed overhead,$0.60 (based on normal capacity).The company has received a special order for 8,000 units at a unit sales price of $1.00.There is ample unused capacity to fill the order.If the order is accepted,operating income will

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The total variable cost per unit is $0.20 (direct materials) + $0.10 (direct labor) + $0.40 (variable overhead) = $0.70. For the special order of 8,000 units at $1.00 each, the total revenue is $8,000. The total variable cost for this order is 8,000 units * $0.70 = $5,600. The difference between the revenue and the variable costs is $8,000 - $5,600 = $2,400, which represents the increase in operating income since fixed costs do not change with this order.

The Normal Selling Price of Carla Company's Product Is $3