Belfry Company Makes Special Equipment Used in Cell Towers A Foreign Company Has Offered to Buy 85 Units for Sells

question 131

Multiple Choice

Belfry Company makes special equipment used in cell towers.Each unit sells for $410.Belfry produces and sells 12,700 units per year.They have provided the following income statement data: $\begin{array}{|l|r|l|r|}\hline \text { Traditional Format } & & \text { Contribution Format } & \\\hline \text { Revenue } & \$ 5,207,000 & \text { Revenue } & \$ 5,207,000 \\\hline \text { Cost of goods sold } & 2,800,00 d & \text { Variable costs: } & \\\hline \text { Gross profit } & 2,407,00 & \text { Manufacturing } & 900,000 \\\hline \text { Selling \& admin, expenses } & 550,00 & \text { Selling \& admin. } & 300,000 \\\hline & & \text { Contribution margin } & 4,007,000 \\\hline & & \text { Fixed costs: } & \\ \hline & & \text { Manufacturing } &1,900,000\\\hline & & \text { Selling \& admin. } & 250,000 \\\hline\text { Operating income } & \$ 1,857,000 &\text { Operating income } & \$ 1,857,000\\ \hline\end{array}$
A foreign company has offered to buy 85 units for a reduced sales price of $350 per unit.The marketing manager says the sale will not affect the company's regular sales.The sales manager says that this sale will require variable selling and administrative costs.The production manager reports that it would require an additional $30,000 of fixed manufacturing costs to accommodate the specifications of the buyer.If Belfry accepts the deal,how will this impact operating income? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

• A) Operating income will increase by $8282.
• B) Operating income will decrease by $8282.
• C) Operating income will increase by $29,750.
• D) Operating income will decrease by $21,719.

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