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Sunderson Products, Inc. has received a special order for 1,000 units of a sport-fighting kite....

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Question

Accounting

Sunderson Products, Inc. has received a special order for 1,000 units of a sport-fighting kite. The customer has offered a price of $9.95 for each kite. The unit costs of the kite, at its normal sales level of 30,000 units per year, are detailed below:

The computations are:

Variable production costs $ 5.25

Fixed production costs 2.35

Variable selling costs 0.75

Fixed selling and admin. costs 3.45 T

There is ample idle capacity to produce the special order without any increase in total fixed costs. The variable selling costs on the special order would be $0.15 per unit instead of $0.75 per unit. The special order would have no impact on the company's other sales. What effect would accepting this special order have on the company's net operating income?

Multiple Choice

$1,850 increase

$1,850 decrease

$4,550 increase

$4,550 decrease

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