Glade Industries Manufactures and Bottles Energy Drinks

Multiple Choice

Glade Industries manufactures and bottles energy drinks.Last year the company made and bottled 2,500,000 units.Glade has the capacity to manufacture and bottle 3,000,000 units per year.Glade has received a special offer from a grocery chain for 500,000 bottles with a special label to be sold as the house brand energy drink.Glade's normal selling price is $0.80 per bottle.The special offer is for $360,000 total ($0.72/bottle) .Management estimates that the variable cost per bottle is $0.34; fixed manufacturing overhead is $0.22/bottle.Of the fixed costs assigned to this special order, $2,500 is for the special labels, the remainder is attributable to costs that will be incurred regardless of whether the special order is produced.What is the operating income generated by the special order?

A) $190,000
B) $187,500
C) $80,000
D) $77,500