Question - Do the Hustle Company, a manufacturer of bell bottom jeans, has the capacity to produce 15,000 pairs of jeans each month. Current production and sales are 10,000 pairs per month at a selling price of $15 each. Based on this level of activity, the following unit costs are incurred:
Direct Materials $5.00
Direct Labor $3.00
Variable MOH $0.75
Fixed MOH $1.50
Hustle has received a special order from a customer who wants to pay a reduced price of $10 per pair of jeans for an order of 6,000 pairs of jeans. If the special order is accepted, what will be the change in operating income?
A. increase of $5,000
B. increase of $1,250
C. decrease of $6,250
D. decrease of $30,000
E. increase of $7,500