Using differential analysis-special customer order}

Dribble, Inc., manufactures basketballs. The company's forecasted income statement for the year, before any special orders, is as follows:

Fixed costs included in the forecasted income statement are \(\$ 4,000,000\) in manufacturing cost of goods sold and \(\$ 400,000\) in selling expenses.
A new client placed a special order with Dribble, offering to buy 100,000 basketballs for \(\$ 6.00\) each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Dribble has sufficient capacity to manufacture 100,000 more basketballs, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute variable cost per the unit that is relevant to this decision.)

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Amount Per Unit Sales $8,000,000 $10.00 Manufacturing cost of goods sold 6,400,000 8.00 Gross profit, $1,600,000 $ 2.00 Selling expenses 600,000 1.00 Operating income $1,000,000 $ 1.00