I'm preparing for CMA Part2 for Jan and Feb'21 window, in the same would like your help in understanding of "Variable Selling and expenses consideration in special offer decision making, what if ideal capacity? is it relevant or irrelevant cost? i have seen There are two different approach In below 2 MCQ, in 1st MCQ its not consider treated as irrelevant and in 2nd MCQ its treated as relevant (cant ignore in decision making), please help to let me know if its otherwise.
If Johnson accepts the special order, they will gain $112,500 ($7.50 price multiplied by the 15,000 volume). The order will cost $75,000 ($5 variable manufacturing cost multiplied by the 15,000 volume).
Therefore, the increase in operating income is calculated as:
Increase in operating income = $112,500 − $75,000 = $37,500.
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