At the end of the year, a company offered to buy 4,480 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 61,300 units of the product that X Company has already made and sold to its regular customers: Sales $1,164,700 Cost of goods sold 536,375 Gross margin $628,325 Selling and administrative costs 158,767 Profit $469,558

For the year, variable cost of goods sold were $402,741, and variable selling and administrative costs were $80,916. The special order product has some unique features that will require additional material costs of $0.70 per unit and the rental of special equipment for $3,500.

4. Profit on the special order would be

5. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost unless the selling price for them is reduced by $0.16. The effect of reducing the selling price will be to decrease firm profits by