Arkansas Company Has No Beginning and Ending Inventories,and Has Obtained

question 94

Multiple Choice

Arkansas Company has no beginning and ending inventories,and has obtained the following data for its only product:
$\begin{array}{ll}\text { Selling price per unit } & \$ 65 \\\text { Direct materials used } & \$ 150,000 \\\text { Direct labor } & \$ 225,000 \\\text { Variable factory overhead } & \$ 140,000 \\\text { Variable selling and administrative expenses } & \$ 60,000 \\\text { Fixed factory overhead } & \$ 370,000 \\\text { Fixed selling and administrative expenses } & \$ 30,000\end{array}$
$\begin{array} { l } \text {Units produced and sold }&20,000 \\\end{array}$

Assume there is excess capacity.There is a special order outstanding for 1,000 units at $40.00 per unit.If Arkansas Company accepts the special order,net income would ________.

• A) increase by $40,000
• B) increase by $11,250
• C) decrease by $28,750
• D) decrease by $10,000

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