Question: Bel Company produces a desks with the following unit cost (excludes selling cost): The production capacity is

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Question:
Bel Company produces a desks with the following unit
cost (excludes selling cost):
The production capacity is 4,000 units per year.
Because of a depressed market, the company expects to produce
only 1,800 shelfs for the coming year.
The company also has fixed selling costs totaling $5,000 per
year and variable selling costs of $1.50 per unit sold (which
relates to the sales commission on each unit sold).
The shelf normally sells for $13.50 each.
At the beginning of the year, a customer from a geographic
region outside the area normally served by the company offered to
buy 2,200 shelfs for $8.50 each.
The customer also offered to pay all transportation costs as
they are outside of the normal region that Belfast sells to.
Since there would be no sales commissions involved, this order
would not have any variable selling costs.
Required:
Use the above information to answer the following questions
about this special order.
Part A:
If the company accepts this order, will their operating income
increase, decrease, or stay the same?
Enter IN for increase, DE for decrease, and NA for stay the same
in the space provided.
By how much will operating income change if the order is
accepted?
Enter your answer as a positive number.
Part B:
Assume now that the order from the customer was through your
most successful salesperson who is expecting to be paid their
commission. Also assume that the customer requires you, Belfast, to
pay for any related transportation costs which amount to $2.50 per
unit.
Considering these new details, will operating income increase,
decrease or stay the same if Belfast accepts the order?
Enter IN for increase, DE for decrease, and NA for stay the same
in the space provided.
Considering these new details, by how much will operating change
if Belfast accepts the order?
Enter your answer as a positive number in the space
provided.