Multiple Choice
Fox Inc. manufactures and sells pens for $5 each. Wolf Corp. has offered Fox Inc. $3 per pen for a one-time order of 3,500 pens. The total manufacturing cost per pen, using traditional costing, is $1 per unit, and consists of variable costs of $0.85 per pen and fixed overhead costs of $0.15 per watch. Assume that Fox Inc. has excess capacity and that the special order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order?
A) increase of $7,000
B) decrease of $7,000
C) increase of $7,525
D) decrease of $7,525
Correct Answer:
Verified
Correct Answer:
Verified
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