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Question - West Car Company produces sound systems for cars and sells them to automotive manufacturers for $720 each. Full capacity is 5000 systems per month, but it is currently producing 4500 systems per month for its regular customers. The company reports the following results on selling price and variable costs:
Per Unit
Selling price $720
Direct Materials 122
Direct Manufacturing Labor 250
Variable Manufacturing Overhead 100
Variable Selling Expenses 60
Monthly fixed manufacturing overhead costs total $289570, and monthly fixed selling expenses total $76250.
West Car's, Joshua Todd manager receives a call from a potential customer regarding a one special order. Bryan Automotive needs 500 systems and will pay $559 per system. Bryan will incur no selling costs for the special order.
Required - Calculate operating income assuming that the company will reject the special order (without special order).
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