Question

Nina Company has provided the following information: Direct material $35.00 Direct labor $16.00 Variable manufacturing overhead $14.00 Fixed manufacturing overhead $12.00 Variable administrative expense $8.00 Fixed administrative expense $5.00 Nina normally produces 15,000 units and sells these units at $150 per unit. A national discount box store has contacted the company about ordering 3,500 units that would be manufactured in a slightly different way and would save the company $6.00 per unit in direct materials. Nina has excess capacity and this order would not affect normal production The special order would not change Nina's fixed costs. The special order would have a unit price of $120. The special order would increase (decrease) Nina's net operating income by _______. You must format you answer as follows: $x,xxx (for an increase in net operating income) $(x,xxx) (for a decrease in net operating income)

Answer 1

there is an increase of net operating income of $ 185,500 I. e., ( 1085500-900000 ) .

Note : fixed cost remain same irrespective of production.