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The XYZ Company has just obtained a request for a special order of 6,000 jigs...

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Accounting

The XYZ Company has just obtained a request for a special order of 6,000 jigs to be shipped at the end of the month at a selling price of $8 each. The company has a production capacity of 90,000 jigs per month with total fixed production costs of $144,000. At present, the company is selling 85,000 jigs per month through regular channels at a selling price of $11 each. For these regular sales, the cost for one jig is: Variable Production Cost $4.6 Fixed Production Cost $1.8 Variable Selling Expense $1.0 If the special order is accepted, XYZ will not incur any selling expense; however, it will incur shipping costs of $0.40 per unit. If ABC accepts the special order, what will be the change in monthly operating income?

a.

$7,200 increase.

b.

$3,600 decrease.

c.

$5,400 decrease.

d.

$12,600 increase.

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