1)

Farrow Co. expects to sell 500,000 units of its product in the next period with the following results.

Sales (500,000 units)		$	7,500,000
Costs and expenses
Direct materials			1,000,000
Direct labor			2,000,000
Overhead			500,000
Selling expenses			750,000
Administrative expenses			1,285,000
Total costs and expenses			5,535,000
Net income		$	1,965,000

The company has an opportunity to sell 50,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $215,000.

Calculate the combined total net income if the company accepts theoffer to sell additional units at the reduced price of $13 per unit.

Please see attachment. Normal Volume Cost and Expenses Total Costs and expenses Net income (loss) Additional Volume Combined Total