Question: Answer Increase $14,000 Increase $7,775 Decrease $7,875 Decrease $14,000 Wells, Inc. manufactures and sells pens for $7 each. Walton Corp. has offered Wells, Inc. $3

Answer

Increase $14,000

Increase $7,775

Decrease $7,875

Decrease $14,000

Wells, Inc. manufactures and sells pens for $7 each. Walton Corp. has offered Wells, Inc. $3 per pen for a one-time order of 3,500 pens. The total manufacturing cost per pen, using absorption costing, is $1 per unit and consists of variable costs of $0.75 per pen and fixed overhead costs of $0.25 per pen. Assume that Wells, Inc. has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special pricing order?

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