Gandolph Company Manufactures a Product with the Following Costs Per

question 70

Multiple Choice

Gandolph Company manufactures a product with the following costs per unit at the expected production of 30,000 units: $\begin{array}{lr}\text { Direct materials } & \$ 4 \\\text { Direct labor } & 12 \\\text { Variable manufacturing overhead } & 6 \\\text { Fixed manufacturing overhead } & 8\end{array}$ The company has the capacity to produce 40,000 units. The product regularly sells for $40. A wholesaler has offered to pay $32 a unit for 2,000 units.
If the firm is at capacity and the special order is accepted, the effect on operating income would be

• A)$-0-.
• B)a $4,000 increase.
• C)a $16,000 decrease.
• D)a $20,000 increase.

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