1. The Cozy Company manufactures slippers and sells them at $ 10 a pair. Variable manufacturing cost is $ 5.75 a pair, and allocated fixed manufacturing cost is $ 1.75 a pair. It has enough idle capacity available to accept a one-time-only special order of 25,000 pairs of slippers at $ 7.50 a pair. Cozy will not incur any marketing costs as a result of the special order.
What would the effect on operating income be if the special order could be accepted without affecting normal sales:
(a) $0,
(b) $ 43,750 increase,
(c) $ 143,750 increase, or
(d) $ 187,500 increase?
Show your calculations.
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