Elkhorn, Inc

Multiple Choice

Elkhorn, Inc., which has excess capacity, received a special order for 4,000 units at a price of $15 per unit. Currently, production and sales are anticipated to be 10,000 units without considering the special order. Budget information for the current year follows.

Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special order is accepted, the company's income will:

A) increase by $2,000.
B) decrease by $2,000.
C) increase by $14,000.
D) decrease by $14,000.
E) None of the answers is correct.