Compute change in operating if order is accepted

Texas Company produces and sells 22,000 units of a single product. Costs associated with this level of production are as follows:

Direct materials $15

Direct manufacturing labor 45

Variable manufacturing overhead 25

Fixed manufacturing overhead 40

Total $124

The product normally sells for $160 per unit. Texas Company has received a special order to sell 2,000 units at $120 per unit. Texas Company has excess production capacity.

Required:

Compute the amount by which the operating income of Texas Company would change if the order were accepted.

Please find the solutions attached.

Texas Company produces and sells 22,000 units of a single product. Costs associated with this level of production are as follows:

Direct materials $15

Direct …

The expert computes change in operating if the order is accepted is determined.