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Owens Industries manufactures breakfast cereal. Last year the company manufactured 1,000,000 boxes of cereal. Owens...

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Accounting

Owens Industries manufactures breakfast cereal. Last year the company manufactured 1,000,000 boxes of cereal. Owens has the capacity to manufacture 1,250,000 boxes of cereal per year. Owens has received a special offer from a grocery chain for 200,000 boxes of cereal with a specially printed box to be sold as the store brand of breakfast cereal. Owens' normal selling price is $2.00 per box. The special offer is for $350,000 total ($1.75/box). Management estimates that the variable cost is $1.00 per box; fixed manufacturing overhead is $.50 per box. Of the fixed costs assigned to this special order, $10,000 is for equipment necessary to print the special boxes, while the remainder is attributable to costs that will be incurred regardless of whether the special order is produced. The special equipment will have no further use after the completion of the order. What is the operating income generated by the special order?

A)

$150,000

B)

$140,000

C)

$50,000

D)

$40,000

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