Reference no: EM132510204

Comfort Cloud manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year.

The following information relates to current production:

Sale price per unit                   $400
Variable costs per unit:
Manufacturing                           $220
Marketing and administrative          $50
Total fixed costs:
Manufacturing                              $750,000
Marketing and administrative           $200,000

Question 1: If a special sales order is accepted for 6,500 seats at a price of $325 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

Select one:
a. Decrease by $357,500
b. Increase by $357,500
c. Increase by $2,112,500
d. Increase by $5,500,000