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8 June, 10:33

Johnson Company manufactures a variety of shoes, and has received a special one-time-only order directly from a wholesaler. Johnson has sufficient idle capacity to accept the special order to manufacture 15,000 pairs of sneakers at a price of $7.50 per pair.

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  1. 8 June, 10:41
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    Addition to operating income by sepcial order is $22,500

    Explanation:

    As the fixed cost is covered by other production. It is not been accounted for in this order. It is an avoidable cost regarding this project.

    Special order 15,000 pairs

    Sale receipt = 15,000 pairs x $7.50 = $112,500

    Variable cost = 15,000 pairs x $5 = $75,000

    Gross Income = $112,500 - $75,000 = $37,500

    Variable Selling Expense = 15,000 pairs x $1

    Variable Selling Expense = $15,000

    Operating Income = Gross Income - Variabe selling price

    Operating Income = $37,500 - $15,000

    Operating Income = $22,500
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