Pluto Incorporated provided the following information regarding its single product:

Direct materials used $240,000

Direct labor incurred$420,0 00

Variable manufacturing overhead $160,000

Fixed manufacturing overhead $100,000

Variable selling and administrative expenses $60,000

Fixed selling and administrative expenses $20,000

The regular selling price for the product is $80. The annual quantity of units produced and sold is 40,000 units (the costs above relate to the 40,000 units production level). The company has excess capacity and regular sales will not be affected by this special order. There was no beginning inventory.

What would be the effect on operating income of accepting a special order for 1,500 units at a sale price of $50 per product assuming additional fixed manufacturing overhead costs of $10,000 are incurred?

Answer rating: 100% (QA)

Ans Operating income increase by 19500 Working Direct material... View the full answer