Problem:
Jo makes and sells a product for $50 per unit. Jo can produce as many as 150,000 units a year. Last year, 100,000 were produced and sold, and production costs per unit were $20 for variable cost and $10 for fixed costs. Jo has received an offer from a new customer who wants to buy 20,000 units for $40 per unit.
What will be the effect (increase or decrease and amount) on Jo's operating income if the offer is accepted? Please explain how you arrived at your conclusion and show your work.