Direct materials 8; Direct labour 15; Variable manufacturing overhead 10; Fixed manufacturing overhead 12. The company has the capacity to produce 70,000 units. The product regularly sells for 60. A wholesaler has offered to pay 60 each for 5,000 units. If the special order is accepted, the effect on operating income would be a

Select one:

a. 135,000 increase

b. 182,000 decrease

c. cannot be determined

d. 110,000 increase

e. 67,000 increase

If there is excess capacity, the minimum acceptable price for a special order must cover

Select one:

a. variable and fixed manufacturing costs associated with the special order

b. only fixed costs

c. variable and incremental fixed costs associated with the special order

d. only variable costs associated with the special order

e. variable costs and incremental fixed costs associated with the special order, plus the contribution margin usually earned on regular units