Grizzly Company
Grizzly Company manufactures footballs.The forecasted income statement for the year before any special orders is as follows:

Refer to Grizzly Company.By what amount would operating income of Grizzly be increased or decreased as a result of accepting the special order?
A)$25,000 decrease
B)$62,500 decrease
C)$100,000 increase
D)$125,000 increase

Question

Grizzly Company
Grizzly Company manufactures footballs.The forecasted income statement for the year before any special orders is as follows:

Refer to Grizzly Company.By what amount would operating income of Grizzly be increased or decreased as a result of accepting the special order?
A)$25,000 decrease 
B)$62,500 decrease 
C)$100,000 increase 
D)$125,000 increase

Quizplus · Accepted Answer

Accepting the special order will result in additional revenue of $500,000 for the year. The cost to make these units is $300,000, resulting in a contribution margin of $200,000 ($500,000 - $300,000). Operating income will increase by the contribution margin of $200,000. Therefore, the correct answer is D, a $125,000 increase in operating income.

Grizzly Company Grizzly Company Manufactures Footballs.The Forecasted Income Statement for the Year