Pluto Incorporated Provided the Following Information Regarding Its Single Product

Pluto Incorporated provided the following information regarding its single product: The regular selling price for the product is $80. The annual quantity of units produced and sold is 40,000 units (the costs above relate to the 40,000 units production level) . The company has excess capacity and regular sales will not be affected by this special order. There was no beginning inventory.
What would be the effect on operating income of accepting a special order for 1,500 units at a sale price of $50 per product assuming additional fixed manufacturing overhead costs of $10,000 are incurred?

A) Decrease by $42,000
B) Decrease by $32,000
C) Increase by $32,000
D) Increase by $42,000

Correct Answer:

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