Felix Time Company manufactures and sells watches for $40 each
Times Products Company has offered Felix Time $25 per watch for a one-time order of 5,000 watches. The total manufacturing cost per watch is $28 per unit and consists of variable costs of $20 per watch and fixed overhead costs of $8 per watch. Assume that Felix Time has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order?
A) increase of $25,000
B) decrease of $25,000
C) increase of $125,000
D) decrease of $125,000
A .A)
Sales revenue (25 x 5,000 ) $125,000
Variable Manufacturing Costs (5,000 x 20 ) 100,000
Increase in operating income $25,000
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