Tunnel Incorporated Provided the Following Information Regarding Its Single Product

question 88

Multiple Choice

Tunnel Incorporated provided the following information regarding its single product: The regular selling price for the product is $80. The annual quantity of units produced and sold is 40,000 units (the costs above relate to the 40,000 units production level) . The company has excess capacity and regular sales will not be affected by this special order. There was no beginning inventory.
What would be the effect on operating income of accepting a special order for 2500 units at a sale price of $54 per product assuming additional fixed manufacturing overhead costs of $15,000 are incurred? (Round any intermediary calculations to the nearest cent.)

• A)Decrease by $78,425
• B)Decrease by $63,425
• C)Increase by $63,425
• D)Increase by $78,425

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Definitions:

Flood Basalt

Vast plateaus formed by the eruption of large amounts of lava that solidifies on the surface.

Fissures/Dikes

narrow openings or fractures in the Earth's crust that allow magma to rise, solidifying as dikes.

Lava Tubes

Natural conduits formed by flowing lava moving beneath the hardened surface of a lava flow, often creating tunnel-like structures.

Central Vents

The main conduit in a volcanic system through which magma travels from beneath the Earth's surface to its exterior.