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Compute change in operating if order is accepted

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Texas Company produces and sells 22,000 units of a single product. Costs associated with this level of production are as follows:

Direct materials $15

Direct manufacturing labor 45

Variable manufacturing overhead 25

Fixed manufacturing overhead 40

Total $124

The product normally sells for $160 per unit. Texas Company has received a special order to sell 2,000 units at $120 per unit. Texas Company has excess production capacity.

Required:

Compute the amount by which the operating income of Texas Company would change if the order were accepted.

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The expert computes change in operating if the order is accepted is determined.

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Texas Company produces and sells 22,000 units of a single product. Costs associated with this level of production are as follows:

Direct materials $15

Direct ...

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Manal Elkhoshkhany, MBA
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  • MBA, California State University, Sacramento
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