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Alpha Productions produces computer cables specifically for accountants within the United States. These special cables are what give accountants their superpowers. Once cable in particular, a video display cable, is sold to customers at a price of $20 per cable. The company currently produces 70,000 video cables each year, which represents 80% of the total capacity available for production. At the current level of production, the cost of producing and selling a single video cable are as follows:

Variable Product Costs	$4.00
Fixed Product Costs	$2.00
Variable Period Costs	$1.00
Fixed Period Costs	$0.50

A group of accountants from Europe have approached Alpha Productions to place a special order for video cables for the accountants in Europe. This special order is for 20,000 video cables. Because this is such a large order, the European accountants expect a bulk discount, and expect to pay $16.50 per cable. The specifications for the cables are different from the regular video cables produced. As such, unit variable costs per unit will decrease by $0.50 per unit. Because of the new specifications, engineers were required to rework the design of the cables, incurring costs of $3,000 to do so. The variable period costs consist solely of sales commissions, which will not be incurred with the special order. Other fixed period costs will not change if the special order is accepted.

By how much will operating income change if the special order is accepted?

A.

Increase by $257,000

B.

Increase by $189,500

C.

Increase by $219,500

D.

Increase by $199,500

E.

Increase by $209,500

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