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27 May, 18:22

If a special sales order is accepted for 3,000 seats at a price of $330 per unit, and fixed costs increase by $13,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) A. Increase by $227,000 B. Increase by $77,000 C. Increase by $90,000 D. Decrease by $77,000

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  1. 27 May, 18:34
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    B) Increase by $77,000

    Explanation:

    variable costs per unit:

    manufacturing $250

    mktg. and adm. $50

    total $300

    contribution margin per unit = sales price - total variable costs = $330 - $300 = $30

    if the special is accepted, operating income will increase by = ($30 contribution margin per seat x 3,000 seats) - $13,000 increase in fixed costs = $90,000 - $13,000 = $77,000
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