Fox Ltd Manufactures and Sells Pens for $5 Each

question 44

Multiple Choice

Fox Ltd manufactures and sells pens for $5 each.Wolf Company has offered Fox Ltd $4 per pen for a one-time order of 3500 pens.The total manufacturing cost per pen,using traditional costing,is $1 per unit,and consists of variable costs of $0.80 per pen and fixed overhead costs of $0.20 per pen.Assume that Fox Ltd has excess capacity and that the special order would not adversely affect regular sales.What is the change in operating profit that would result from accepting the special sales order?

• A) increase of $11,200
• B) increase of $3500
• C) decrease of $3500
• D) decrease of $11,200

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