Question

A foreign company has offered to buy 75 units for a reduced sales price of $320 per unit. The marketing manager says the sale will not affect the company's regular sales. The sales manager says that this sale will require variable selling and administrative costs. The production manager reports that it would require an additional $20,000 of fixed manufacturing costs to accommodate the specifications of the buyer. If Fruit Computer Company accepts the deal, how will this impact operating income

Answer 1

Answer:

an increase in the operating income by $16,322

Explanation:

The computation of the impact in the operating income is given below:

Variable cost of 75 units (1300000 × 75 ÷ 12700)   7,678

Sale price of 75 units (75 × 320)  24,000

Increase in operating income (24000 - 7678)   $16,322

hence, the impact in the operating income is that there is an increase in the operating income by $16,322