Widget Inc

Multiple Choice

Widget Inc. manufactures widgets. The company has the capacity to produce 100,000 widgets per year, but it currently produces and sells 75,000 widgets per year. The following information relates to current production: If a special sales order is accepted for 7000 widgets at a price of $41 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

A) Decrease by $42,000
B) Increase by $42,000
C) Increase by $287,000
D) Increase by $2,200,000