Choice Manufacturing has received an offer from swag inc. to purchase 2,000 units of its standard product at a price of $39 per unit.

choices current production and sales is as follows: Units produced & sold annually 10,000 Unit production capacity 14,000 Per unit Regular sales price $ 55.00 Direct Materials 20.00 Direct Labor 10.00 Variable Overhead 6.00 Fixed Overhead 2.00

a. What is the short-term change in Operating Income if swags special offer is accepted?

b. Suppose that choice is operating at full capacity producing and selling 14,000 units per year. What is the Opportunity Cost if swags special offer is accepted?

c. What non-financial factors should choice consider in deciding whether to accept/reject swags offer

Answer rating: 100% (QA)

a To determine the shortterm change in operating income if Swag Incs special offer is accepted we need to compare the operating income under the curre... View the full answer