The regular selling price per chaise lounge is $290. The company is analyzing the opportunity to accept a special sales order for 1200 chaise lounge at a price of $210 per unit. Fixed costs would remain unchanged. The company has the capacity to produce 55,000 chaise lounges per year, but is currently producing and selling 9000 chaise lounges per year. The 1200 units would not require any variable marketing and administrative expenses. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected

$84,000

Explanation:

The calculation of operating income is shown below:-

Sales                                                       $252,000

(1,200 × $210)

Variable Manufacturing cost                $127,200

(1,200 × $106)

Variable marketing and

administrative cost                                  $40,800

(1,200 × $34)

Incremental profit                                   $84,000

So, the incremental profit is $84,000

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