2C2I JOHNSON COMPANY MANUFACTURES A VARIETY OF SHOES, AND HAS RECEIVE...

235.

CSO: 2C2c

LOS: 2C2i

Johnson Company manufactures a variety of shoes, and has received a special one-time-

only order directly from a wholesaler. Johnson has sufficient idle capacity to accept the

special order to manufacture 15,000 pairs of sneakers at a price of $7.50 per pair.

Johnson’s normal selling price is $11.50 per pair of sneakers. Variable manufacturing

costs are $5.00 per pair and fixed manufacturing costs are $3.00 a pair. Johnson’s

variable selling expense for its normal line of sneakers is $1.00 per pair. What would the

effect on Johnson’s operating income be if the company accepted the special order?

a.

Decrease by $60,000.

b.

Increase by $22,500.

c.

Increase by $37,500.

d.

Increase by $52,500.