Centric Sail Makers Manufacture Sails for Sailboats

question 27

Multiple Choice

Centric Sail Makers manufacture sails for sailboats. The company has the capacity to produce 35,000 sails per year, and is currently producing and selling 25,000 sails per year. The following information relates to current production: If a special sales order is accepted for 5,500 sails at a price of $150 per unit, and if the order requires both variable manufacturing and variable marketing and administrative costs, and incremental fixed costs of $400,000, what will be the impact on operating income?

• A)Operating income decreases by $385,000.
• B)Operating income decreases by $15,000.
• C)Operating income increases by $385,000.
• D)Operating income increases by $15,000.

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Definitions:

Government Policy

The actions, laws, or regulations established by governments to guide economic, social, and administrative issues.

Money Supply

The total financial resources available within an economy at a given time frame.

Job Offers

Proposals from employers to prospective employees to begin employment under specified conditions.

Nominal Wage

The wage paid to workers measured in current dollars without adjustment for inflation.