Homework Answers
The effect on operating income if special order is accepted
= No. of units × (offer price per unit - relevant cost per unit of slippers)
= 25000 × ( 7.5 - variable manufacturing cost)
= 25000 × ( 7.5 - 5.75)
= $ 43750
Thus the correct answer is
Effect on operating income = $ 43750
Note
Fixed manufacturing cost is sunk cost, hence not considered as relevant as It has already been incurred.
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Variable manufacturing overhead
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3
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16
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Please explain what costs you include when deciding to
take the special order and How you get whether the business is
increasing or decreasing operating income by accepting the order.
Thank you
10:26 & D 62 nybusinesscourse.com Business Course Pope Company manufactures a variety of hiking boots and has received a special one-time-only order from a new customer. Pope has sufficient idle capacity to accept the special order to manufacture 1,100 pairs of boots at a price of $51.00 per...
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