The Following Information Relates to Current Production of Outdoor Chaise

Multiple Choice

The following information relates to current production of outdoor chaise lounges Backyard Posh: The regular selling price per chaise lounge is $340. The company is analyzing the opportunity to accept a special sales order for 300 chaise lounges at a price of $220 per unit. Fixed costs would increase by $22,000. The company has the capacity to produce 35,000 chaise lounges per year, but is currently producing and selling 13,000 chaise lounges per year. Regular sales will not be affected by the special order. If the company were to accept this special order, how would operating income be affected?

A) Decrease by $3500
B) Increase by $25,500
C) Decrease by $25,500
D) Increase by $3500