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Marigold Corp. manufactures a product with a unit variable cost of $100 and a unit sales...

Marigold Corp. manufactures a product with a unit variable cost of $100 and a unit sales price of $181. Fixed manufacturing costs were $480000 when 10000 units were produced and sold. The company has a one-time opportunity to sell an additional 1000 units at $120 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Income would decrease by $28000.

Income would increase by $120000.

Income would increase by $20000.

Income would increase by $28000.

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Answer #1

Answer :- Income would increase by $20,000. Option C is correct answer.

Increase in Income = Contribution Margin * units sold

Increase in Income = ($120-$100) * 1,000

Increase in Income = $20,000

Since the company has sufficient capacity to produce the additional units, acceptance of the special order would not add to the fixed overhead and therefore result in a profit of $20.

So the correct answer is option C.

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