Question

Wisconsin Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $1.00 per unit and fixed costs are $0.50 per unit. Current monthly sales are 164,500 units. Gates Company has contacted Wisconsin Company about purchasing 20,000 units at $2.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. Variable costs would increase $0.10 per unit with the special order. If the order is accepted, what is Wisconsin Company's increase in operating income? A) $8,000 B) $18,000 C) $20,000 D) $24,000

Answer 1

about  $18,000  Wisconsin Company's increase in operating income.

Operating profit refers to the company's adjusted earnings after deducting all operating expenses and depreciation. Operating expenses or operating expenses are simply the costs incurred to keep a business running.million and $250,000 operating expenses. The company's operating income is $1 million minus $250,000 or $750,000.

Operating profit measures a company's ability to generate profit from its operations. Many business owners use the operating profit metric to measure the operational success of their business. Investors and creditors may want to see your company's operating income.

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