The Following Information Relates to a Product Produced by Orca

Multiple Choice

The following information relates to a product produced by Orca Company:
$$\begin{array} { l r } \text { Direct materials } & \$ 20 \\\text { Direct labor } & 14 \\\text { Variable overhead } & 12 \\\text { Fixed overhead } &\underline{ 16} \\ \text { Unit cost } &\underline{ \$ 62 }\\\end{array}$$
Fixed selling costs are $1,000,000 per year. Although production capacity is 500,000 units per year, Orca expects to produce only 400,000 units next year. The product normally sells for $80 each. A customer has offered to buy 60,000 units for $60 each. The customer will pay the transportation charge on the units purchased. If Orca accepts the special order, the effect on operating profits would be a:

A) $120,000 increase.
B) $360,000 increase.
C) $840,000 increase.
D) $1,200,000 decrease.