The following information relates to current production of outdoor chaise lounges at Backyard Posh: The regular selling price per chaise lounge is $350. The company is analyzing the opportunity to accept a special sales order for 300 chaise lounges at a price of $210 per unit. Variable marketing and administrative costs would be $15 per unit lower than on regular sales. Fixed costs would increase by $15,000. The company has the capacity to produce 115,000 chaise lounges per year, but is currently producing and selling 13,000 chaise lounges per year. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected?
A)Decrease by $26,400
B)Decrease by $11,400
C)Increase by $26,400
D)Increase by $11,400

Question

The following information relates to current production of outdoor chaise lounges at Backyard Posh:  The regular selling price per chaise lounge is $350. The company is analyzing the opportunity to accept a special sales order for 300 chaise lounges at a price of $210 per unit. Variable marketing and administrative costs would be $15 per unit lower than on regular sales. Fixed costs would increase by $15,000. The company has the capacity to produce 115,000 chaise lounges per year, but is currently producing and selling 13,000 chaise lounges per year. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected?
A)Decrease by $26,400 
B)Decrease by $11,400 
C)Increase by $26,400 
D)Increase by $11,400

Quizplus · Accepted Answer

The Answer of The following information relates to current production of outdoor chaise lounges at Backyard Posh:  The regular selling price per chaise lounge is $350. The company is analyzing the opportunity to accept a special sales order for 300 chaise lounges at a price of $210 per unit. Variable marketing and administrative costs would be $15 per unit lower than on regular sales. Fixed costs would increase by $15,000. The company has the capacity to produce 115,000 chaise lounges per year, but is currently producing and selling 13,000 chaise lounges per year. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected?
A)Decrease by $26,400 
B)Decrease by $11,400 
C)Increase by $26,400 
D)Increase by $11,400

The Following Information Relates to Current Production of Outdoor Chaise