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.