Chocolate Company Currently Has Excess Capacity Cost of Goods Sold Includes $20,000 of Fixed Manufacturing Cost

Chocolate Company currently has excess capacity. A special order for 5,000 units is received at a price of $13 per unit. Currently, production and sales are anticipated to be 20,000 units without considering the special order. Budget information for the current year follows. $\begin{array}{lccc} \text { Sales } & \$ 300,000 \\ \text { Less: Cost of goods sold } & \underline{ 160,000 } \\\text { Gross margin } & \underline{\$140,000 }\end{array}$
Cost of goods sold includes $20,000 of fixed manufacturing cost. If the special order is accepted, the company's income will:

A) Increase by $30,000.
B) Decrease by $30,000.
C) Increase by $35,000.
D) Decrease by $35,000.
E) Increase by $65,000.

Correct Answer:

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