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Moderate

Effect on profit

MGRACT-C5ONXA

Journey Co. budgeted sales of 325,000 briefcases at \$38 per unit for the year. Variable manufacturing costs were budgeted at \$16 per unit and fixed manufacturing costs at \$10 per unit. A special order offering to buy 40,000 briefcases for \$18 each was received by Journey in December. Journey Co. has sufficient capacity to manufacture the additional quantity; however, the production would have to be done on an overtime basis at an estimated additional cost of \$3 per briefcase. Acceptance of the special order would not affect Journey's normal sales and no selling expenses would be incurred.

What would be the effect on Journey's operating profit if the special order were accepted?

A

$80,000 increase

B

$440,000 decrease

C

$40,000 decrease

D

$320,000 decrease