Use the Information Below to Answer the Following Question(s)

question 45

Multiple Choice

Use the information below to answer the following question(s) :
Clear Sky Sailmakers manufactures sails for sailboats. The company has the capacity to produce 15,000 sails per year, but is currently producing and selling 10,000 sails per year. The following information relates to current production:

-If Clear Sky Sailmakers accepts a special order for 3,000 sails at a price of $215 per unit, fixed costs remain unchanged, and no variable marketing and administrative costs will be incurred for this order, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

• A) Increase by $50,000
• B) Increase by $150,000
• C) Increase by $0
• D) Decrease by $50,000

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Definitions:

Market Shares

The percentage of total sales or total revenue generated by a company in a particular market.

Price Leadership

Price leadership occurs when one leading company in an industry sets the price for its products, and other companies in the industry follow suit, often seen in oligopolistic markets.

Product Differentiation

Product Differentiation is the process by which companies distinguish their products from those of competitors on aspects like quality, design, or brand.

Price Leadership

A market situation where one leading firm sets the price of goods or services, and other firms in the industry follow suit, typically seen in oligopolies.