1. The Fresh Company manufactures slippers and sells them at $9 a pair. Variable manufacturing cost is $3.00 a pair, and allocated fixed manufacturing cost is $0.50 a pair. It has enough idle capacity available to accept a one-time-only special order of 5,000 pairs of slippers at $3.50 a pair. Fresh will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $2,500 increase, (c) $15,000 increase, or (d) $17,500 increase? Show your calculations.
1. The Fresh Company manufactures slippers and sells them at $9 a pair. Variable manufacturing cost is $3.00 a pair, and allocated fixed manufacturing cost is $0.50 a pair. It has enough idle capacity available to accept a one-time-only special order of 5,000 pairs of slippers at $3.50 a pair. Fresh will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $2,500 increase, (c) $15,000 increase, or (d) $17,500 increase? Show your calculations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![1. The Fresh Company manufactures slippers and sells them at $9 a pair. Variable manufacturing cost is $3.00 a pair,
and allocated fixed manufacturing cost is $0.50 a pair. It has enough idle capacity available to accept a one-time-only
special order of 5,000 pairs of slippers at $3.50 a pair. Fresh will not incur any marketing costs as a result of the special
order. What would the effect on operating income be if the special order could be accepted without affecting normal
sales: (a) $0, (b) $2,500 increase, (c) $15,000 increase, or (d) $17,500 increase? Show your calculations.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb761add8-5aee-4388-a5b1-0dcb3c343b9b%2F3e4f5f55-4e91-45d7-9640-48dbdd1ade7a%2Fgk4katk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. The Fresh Company manufactures slippers and sells them at $9 a pair. Variable manufacturing cost is $3.00 a pair,
and allocated fixed manufacturing cost is $0.50 a pair. It has enough idle capacity available to accept a one-time-only
special order of 5,000 pairs of slippers at $3.50 a pair. Fresh will not incur any marketing costs as a result of the special
order. What would the effect on operating income be if the special order could be accepted without affecting normal
sales: (a) $0, (b) $2,500 increase, (c) $15,000 increase, or (d) $17,500 increase? Show your calculations.
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