Relay Corporation Manufactures Batons

Multiple Choice

Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of $750,000 and a fixed cost of $450,000. Based on Relay's predictions for next year, 240,000 batons will be sold at the regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 40% discount off the regular price. Total fixed costs would be unaffected by this order. By what amount would the company's net operating income be increased or decreased as a result of the special order?

A) $180,000 increase.
B) $30,000 increase.
C) $36,000 increase.
D) $60,000 decrease.