Reference no: EM133152403

Question - Visionary Game Company sells 600,000 units per year of a particular video game cartridge at $12 each. The current unit cost of the game is broken down as follows:

Direct materials $3.00

Direct labor $1.00

Variable factory overhead $3.50

Fixed factory overhead $1.50

Total $9.00

At the beginning of the current year, Visionary received a special order for 10,000 of these game cartridges per month, for one year only, at a sales price of $8 per unit. To fill the order, Visionary will have to rent additional assembly space at a cost of $12,000 ($1,000 per month). Compute the estimated increase or decrease in annual operating income that will result from accepting this special order.