Pietarsaari Oy a Finnish company produces cross-country ski poles that it sells for 31 a pair. (The Finnish unit of currency the euro is
denoted by ) Operating at capacity the company can produce 51000 pairs of ski poles a year. Costs associated with this level of production
and sales are given below:
The Finnish army would like to make a one-time-only purchase of 9300 pairs of ski poles for its mountain troops. The army would pay a fixed
fee of 4 per pair and in addition it would reimburse the Pietarsaari Oy company for its unit manufacturing costs (both fixed and variable).
Due to a recession the company would otherwise produce and sell only 41700 pairs of ski poles this year. (Total fixed manufacturing overhead
cost would be the same whether 41700 pairs or 51000 pairs of ski poles were produced.) The company would not incur its usual variable selling
expenses with this special order.
If the Pietarsaari Oy company accepts the army%u2019s offer by how much would net operating income increase or decrease from what it would be
if only 41700 pairs of ski poles were produced and sold during the year? (Input the amount as a positive
(Click to select) Increase Decrease in net operating income
Assume the same situation as described in (1) above except that the company is already operating at capacity and could sell 51000 pairs of
ski poles through regular channels. Thus accepting the army%u2019s offer would require giving up sales of 9300 pairs at the normal price of
31 a pair. If the army%u2019s offer is accepted by how much will net operating income increase or decrease from what it would be if the 9300
pairs were sold through regular channels? (Input the amount as a positive value. Omit the sign in your
(Click to select) Decrease Increase in net operating income