Sky High Seats Manufactures Seats for Airplanes

Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production: If a special sales order is accepted for 2,500 seats at a price of $320 per unit, fixed costs increase by $5,000, 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 $187,500
B) Decrease by $182,500
C) Increase by $182,500
D) Increase by $245,000

Correct Answer:

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