26. Smith Co. received an offer to buy 3,800 units of its product for $7.50 per unit. Smith Co. normally produces 12,000 units but only plans to produce and sell 8,000 units in the coming year. The normal sales price is $12 per unit. Unit cost info is:

Direct materials $2.00

Direct labor $3.10

Variable overhead $1.80

Fixed overhead $2.00

If Smith Co. accepts the order, no fixed manufacturing activities will be affected. Should Smith Co. accept the order?

a.	Yes, because income will increase by $5,320	c.	No, because income will decrease by $2,280
b.	No, because income will decrease by $5,320	d.	Yes, because income will increase by $2,280

27. Refer to question 26. Smith Co.s warehouse distribution center is operating at full capacity and would have to add capacity costing $1,000 for every 5,000 units to be packed and shipped. Should Smith Co. accept the special order?

a.	Yes, because income would increase by $6,320	c.	No, because income would decrease by $3,280
b.	No, because income would decrease by $6,320	d.	Yes, because income would increase by $1,280