Arkansas Company Has No Beginning and Ending Inventories,and Has Obtained

Multiple Choice

Arkansas Company has no beginning and ending inventories,and has obtained the following data for its only product:
$\begin{array}{ll}\text { Selling price per unit } & \$ 65 \\\text { Direct materials used } & \$ 150,000 \\\text { Direct labor } & \$ 225,000 \\\text { Variable factory overhead } & \$ 140,000 \\\text { Variable selling and administrative expenses } & \$ 60,000 \\\text { Fixed factory overhead } & \$ 370,000 \\\text { Fixed selling and administrative expenses } & \$ 30,000\end{array}$
$\begin{array} { l } \text {Units produced and sold }&20,000 \\\end{array}$

Assume there is excess capacity.There is a special order outstanding for 1,000 units at $40.00 per unit.If Arkansas Company accepts the special order,net income would ________.

A) increase by $40,000
B) increase by $11,250
C) decrease by $28,750
D) decrease by $10,000