Question

Knowledge Check 01 Stewart Corporation manufactures solar powered calculators. The company can manufacture 1200.000 calculator a year at a variable cost of $3,000,000 and a fixed cost of $1,800,000. Based on management's projections for next year. 960.000 calculators will be sold at the regular price of $20.00 each. A special order has been received for 240.000 calculators at $6 per calculator Totale costs would be unaffected by this order. The company's net operating income will be increased as a result of the special order by $480,000 $600,000 $840,000 $1,440,000

Answer 1

	Variable cost per unit =			3,000,000/1,200,000
				2.5
	contribution		240,000*(6-2.5)=		840000
	answer)	net income will increase by
		$840,000