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 per unit
- Direct manufacturing labor $45 per unit
- Variable manufacturing overhead $25 per unit
- Fixed manufacturing overhead $40 per unit
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 special order was accepted