Jaws Inc. currently sells 40,000 dental tools to its regular customers but it has a capacity to produce 50,000 tools. Its product sells for $30 per tool and the variable costs incurred are as follows on a per tool basis: Direct materials $7 Direct labour $6 Sales commission $1 A customer has proposed a special order to purchase 10,000 tools at a lower selling price. If Jaws accepts the order, the company will not have to pay its sales personnel their sales commissions. However, the company will incur a shipping cost of $3 per tool. If Jaws accepts the order at a special price of $20 per tool, how would operating income be affected? Multiple Choice increase by $50,000 decrease by $30,000 increase by $40,000 decrease by $120,000

Jaws Inc. currently sells 40,000 dental tools to its regular customers but it has a capacity to produce 50,000 tools. Its product sells for $30 per tool and the variable costs incurred are as follows on a per tool basis: Direct materials $7 Direct labour $6 Sales commission $1 A customer has proposed a special order to purchase 10,000 tools at a lower selling price. If Jaws accepts the order, the company will not have to pay its sales personnel their sales commissions. However, the company will incur a shipping cost of $3 per tool. If Jaws accepts the order at a special price of $20 per tool, how would operating income be affected? Multiple Choice increase by $50,000 decrease by $30,000 increase by $40,000 decrease by $120,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 3PB: Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in...

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