Aaa lock manufacturing co makes and sells several models of

Reference no: EM13582507

AAA Lock Manufacturing Co. makes and sells several models of locks. The cost records for the ZForce lock show that manufacturing costs total $29.00 per lock. An analysis of this amount indicates that $16.75 of the total cost has a variable cost behavior pattern, and the remainder is an allocation of fixed manufacturing overhead. The normal selling price of this model is $38.75 per lock. A chain store has offered to buy 15,000 ZForce locks from AAA Lock at a price of $20.00 each to sell in a market that would not compete with AAA Lock's regular business. AAA Lock has manufacturing capacity available and could make these locks without incurring additional fixed manufacturing overhead.
Required:

(a)Calculate the effect on AAA Lock's operating income of accepting the order from the chain store. (Omit the "tiny_mce_markerquot; sign in your response.)in contribution margin and operating income.

Reference no: EM13582507

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