ing costs when its production level is 100000 units tshirts

ing costs when its production level is 100,000 units (t-shirts): Data Table Total costs for 100,000 units Direct materials Direct labor Variable manufacturing overhead 320,000 40,000 85,000 120,000 565,000 er Fixed manufacturing overhead Total manufacturing costs Print Done n continue to the next question. What to Work on Next

Solution

Orr should accept the special sales order because it will increase operating income.

*Direct materials = ($320000/100000) - $0.50 = $3.20 - $0.50 = $2.70

Incremental Analysis of Special Sales Order Decision	Per Unit	Total Order (10000 units)
Revenue from special order	5.00	50000
Less variable expense associated with the order:
Direct materials*	2.70	-27000
Direct labor	0.40	-4000
Variable manufacturing overhead	0.85	-8500
Contribution margin	1.05	10500
Less: Additional fixed expenses associated with the order		0
Increase (decrease) in operating income from the special order		10500