What will be the effect on pretax income if Studiers takes the special order?

Studler’s Restaurant is considering a contract to supply the weal senior citizen center with 10,000 meals. Regular sales at regular prices would be unaffected. The food cost for each meal s S3 Additional costs incurred as a result of the contract would De variable overhead of S 50 and variable selling general and administrative costs of S SO per meal sold. The selling price per meal would be $5, A total of $20,000 in fixed costs would be allocated at $2 per meal. The fixed costs are part of an overall total of $500,000 in annual fixed costs incurred regardless of the contract .

What will be the effect on pretax income if Studiers takes the special order?
A . $10, 000 increase
B. $10.000 decrease
C. $20, 000 increase
D. $20.000 decrease

View Answer

Answer: A