1.A company produces Product A which it normally sells to retailers for $7. The cost of manufacturing 20,000 units is:

Materials 10,000

Labour 30,000 Variable overhead 20,000

Fixed overhead 40,000

Total 100,000

The company also incurs sales commission of $0.35 on each unit sold.

The company is offered to purchase 5,000 units for $4.80 per unit. If the offer is accepted, it will increase fixed overhead by $6000, but the $0.35/unit sales commission will be eliminated.

Prepare an incremental analysis for the special order, should it be accepted? Why or why not?