Homework Answers
The effect on operating income if special order is accepted
= No. of units × (offer price per unit - relevant cost per unit of slippers)
= 25000 × ( 7.5 - variable manufacturing cost)
= 25000 × ( 7.5 - 5.75)
= $ 43750
Thus the correct answer is
Effect on operating income = $ 43750
Note
Fixed manufacturing cost is sunk cost, hence not considered as relevant as It has already been incurred.
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listed
Hoover Rouse Sunglasses sell for about $125 per pair. Suppose
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Data Table
Direct materials
$38
Direct labor
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Variable manufacturing overhead
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Variable marketing expenses
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Fixed manufacturing overhead
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*
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