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How much will operating income change

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Question - Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are:

Direct materials $4.00

Direct labor 6.00

Variable overhead 3.00

Fixed overhead 1.00

Marketing fixed 7.00

Marketing/distribution variable 3.60

Current monthly sales are 190,000 units at $30.00 each. Santo, Inc., has contacted Zephram Corporation about purchasing 20,000 units at $24.00 each. Assume that all of Zephram's costs would be at the same levels and rates as above. If Zephram accepts this offer, it will have to reject some regular business from regular customers so as not to exceed capacity. If they accept the special order, how much will operating income change?

Reference no: EM132848556

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