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Question - Missoula Industries manufactures a product with the following costs per unit at the expected production of 30,000 units:
Direct materials $5
Direct labor 15
Variable manufacturing overhead 8
Fixed manufacturing overhead 6
The company has the capacity to produce 60,000 units. The product regularly sells for $45. A wholesaler has offered to pay $40 each for 2,000 units.
If Missoula is at capacity and the special order is accepted, determine the effect on operating income (profit)?
A. $24,000 increase
B. $12,000 decrease
C. $10,000 decrease
D. $34,000 increase
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