Twisty pretzel company produces bags of pretzels that are sold in cases and retailed throughout the united states. its normal selling price is $30 per case; each case contains 15 bags of pretzels. the variable costs are $19 per case. fixed costs are $25,000 for a normal production run of 5,000 cases per month. twisty pretzel received a special order from an existing customer which it could accommodate without exceeding capacity. the order was for 1,500 units at a special price of $20 per case; a variable selling cost of $1 per case included in the variable costs would not be relevant for this order. if the order is accepted, the impact on operating income would be a(n)

The impact on operating income would be an increase in the operating income by $3000

Explanation:

Twisty pretzel company has received an order for 1500 units at a special price of $20 per case, so the revenue which twisty pretzel can make on this order is =

      REVENUE = Number of units made x Selling price

                        = 1500 x $20

                        = $30,000

Now it is told to us that initial variable cost per case is $19 but here as per new order the variable selling cost of $1 included in the variable cost would now become excluded , so therefore the variable cost for this order would be $19 - $1 = $18 per case

COST = Number of units x Cost price

           = 1500 x $18

           = $27,000

so by subtracting the cost from revenue we get the increase in operating income,

=$30,000 - $27,000

= $3000

it would become a question

Explanation:

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