Extreme Sports received a special order for 1,000 units of its extreme motorbike at a selling price of $250 per motorbike. Extreme Sports has enough extra capacity to accept the order. No additional selling costs will be incurred. Unit costs to make and sell this product are as follows: Direct materials, $100; direct labor, $50; variable manufacturing overhead, $14; fixed manufacturing overhead, $10, and variable selling costs, $2.
a. List the relevant costs.
b. What will be the change in operating income if Extreme Sports accepts the special order?