Falcon Co Produces a Single Product

Multiple Choice

Falcon Co. produces a single product. Its normal selling price is $30.00 per unit. The variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of $20.00 per unit. Falcon Co. has the capacity to handle the special order and, for this order, a variable selling cost of $1.00 per unit would be eliminated. If the order is accepted, what would be the impact on net income?

A) decrease of $750
B) decrease of $4,500
C) increase of $3,000
D) increase of $1,500