Apex Company Produces Artificial Christmas Trees

Apex Company produces artificial Christmas trees. A local shopping mall recently made a special order offer; the shopping mall would like to purchase 200 extra large white trees. Apex Company is currently producing and selling 20,000 trees; the company has the excess capacity to handle this special order. The shopping mall has offered to pay $120 for each tree. An accountant at Apex Company provides an estimate of the unit product cost as follows: This special order would require an investment of $10,000 for the molds required for the extra large trees. These molds would have no other purpose and would have no salvage value. The special order trees would also have an additional variable cost of $5.00 per unit associated with having a white tree. This special order would not have any effect on the company's other sales. If the special order is accepted, the company's operating income would increase (decrease) by

A) $2,300 decrease.
B) $13,100 decrease.
C) $2,100 increase.
D) $13,100 increase.

Correct Answer:

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