FURY produces and sells skateboards. Its contribution margin income statement follows.

A potential customer offers to buy 10,000 units for $42.00 each. These sales would not affect the company’s sales through its normal channels. Details of the special offer follow.

∙ Variable costs per unit would not change.
∙ Accepting the offer would require incremental fixed overhead costs of $10,000.
∙ Accepting the offer would require incremental fixed general and administrative costs of $15,000.

Required

1. Compute income from the special offer.
2. Should the company accept or reject the special offer?

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Contribution Margin Income Statement For Year Ended December 31 Per Unit Annual Total Sales (80,000 units).. $50.00 $4,000,000 Variable costs Direct materials 20.00 1,600,000 Direct labor.... 8.00 640,000 Variable overhead 12.00 960,000 Contribution margin ... 10.00 800,000 Fixed costs Fixed overhead. ... Fixed general and administrative ... 3.00 240,000 2.00 160,000 Income..... $ 5.00 $ 400,000