Reference no: EM131206433
Tom Industries has a plant capacity of 70,000 units and current production is 55,000 units. At this production volume the variable cost per unit is $30, and the fixed cost per unit is $4.10 per unit. The normal selling price of Tom's product is $45 per unit. Tom Industries has been asked by Sadie, Inc., to fill a special order for 10,000 units of the product at a special sales price of $25 each. Sadie, Inc. will market the units in a foreign country under its own brand name; the special order is not expected to have any effect on Tom's regular sales.
1) What impact will accepting the special order have on Tom's operating? income?
A. Accepting the special order will not impact Tom's operating income.
B. Accepting the special order will increase Tom's operating income.
C. Accepting the special order will decrease Tom's operating income.
2) By how much will operating income change if the special order is accepted?
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