Effect on operating income if special order were accepted
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Jordan Company budgeted sales of 395,000 calculators at 38 per unit last year. Variable manufacturing costs were budgeted at 14 per unit, and fixed manufacturing costs at 9 per unit. A special order for 40,005 calculators at 19 each was received by Jordan in March. Jordan has sufficient plant capacity to manufacture the additional quantity without incurring any additional fixed manufacturing costs; however, the production would have to be done on an overtime basis at an estimated additional cost of 2 per calculator. Acceptance of the special order would not affect Jordan's normal sales and no selling expenses would be incurred. What would be the effect on net operating income if the special order were accepted?
200,025 increase
240,030 decrease
120,015 increase
90,011.25 decrease.
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This provides the steps to calculate the effect on net operating income if the special order were accepted.
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