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What is the operating income generated by the special order

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Reference no: EM133130321

Question - Cullumber Industries manufactures and bottles energy drinks. Last year, the company made and bottled 2503000 units. Cullumber has the capacity to manufacture and bottle 3003000 units per year. Cullumber has received a special offer from a grocery chain for 503000 bottles with a special label to be sold as the house brand energy drink. Cullumber's normal selling price is $0.80 per bottle. The special offer is for $362160 total ($0.72/bottle). Management estimates that the variable cost per bottle is $0.34; fixed manufacturing overhead is $0.22/bottle. Of the fixed costs assigned to this special order, $2500 is for the special labels, the remainder is attributable to costs that will be incurred regardless of whether the special order is produced. What is the operating income generated by the special order?

a. $80480

b. $188640

c. $77980

d. $191140

Reference no: EM133130321

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