Blue Technologies Manufactures and Sells DVD Players

Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies' normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $12 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.) Should Blue Technologies accept or reject the special sales order?

A) Accept, because operating income would increase $360,000.
B) Reject, because operating income would decrease $80,000.
C) Accept, because operating income would increase $80,000.
D) Reject, because operating income would decrease $160,000.

Correct Answer:

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