Business, 19.03.2021 18:20 jazzy4211

Faux Trees Company produces artificial Christmas trees. A local shopping mall recently made a special order offer; the shopping mall would like to purchase 230 extra-large white trees. Faux Trees Company is currently producing and selling 20,000 trees; the company has the excess capacity to handle this special order. The shopping mall has offered to pay $160 for each tree. An accountant at Faux Trees Company provides an estimate of the unit product cost as follows: Direct materials $51.61
Direct laborâ€‹ (variable) $3.80
Variable manufacturing overhead $1.00
Fixed manufacturing overhead â€‹$4.00
Total unit cost $60.41

This special order would require an investment of $5,000 for the molds required for the extraâˆ’large trees. These molds would have no other purpose and would have no salvage value. The special order trees would also have an additional variable cost of $8.26 per unit associated with having a white tree. This special order would not have any effect on theâ€‹ company's other sales. If the special order isâ€‹ accepted, theâ€‹ company's operating income would increaseâ€‹ (decrease) by:

a. $15679 decrease.
b. $15,679 increase.
c. $16,708 decrease.
d. $10,679 increase.

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Faux Trees Company produces artificial Christmas trees. A local shopping mall recently made a specia...

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