Reference no: EM132842992

Problem - A parts manufacturer has a production capacity of 20,000 units per month. Unit costs at this production level are:

Direct materials 0.25

Direct labor 0.40

Variable manufacturing overhead 0.15

Fixed manufacturing overhead 0.50

Variable selling expenses 0.20

Fixed selling expenses 0.10

The current demand for this month is estimated to be 18,000 units. Units will be sold at the regular price of $4.00. A client asks about purchasing 2,000 units at $2.00 each. Variable selling expenses typically consist of shipping costs. These costs would not be incurred on the special order because the customer offers to pick up the order with one of their own trucks. What is the manufacturer's change in operating income if the special order is accepted?