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

question 87

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 2,500 sails at a price of $205 per unit, fixed costs increase by $14,000, and variable marketing and administrative costs for that order are $25 per unit, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

• A) Increase by $23,500
• B) Decrease by $23,500
• C) Increase by $37,500
• D) Increase by $86,000

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Definitions:

Seize Property

The act of taking possession of property, often by legal authority, due to legal judgment or law enforcement action.

Attach Funds

A legal process where a creditor seeks court permission to seize the funds of a debtor from a bank account or similar resource to satisfy a debt.

Creditor

A person or entity to whom money is owed by another (the debtor), typically arising from a transaction of credit or loan.

Judgment

A formal decision or finding made by a court following a legal proceeding.