Bradley Inc. has the capacity to make 100,000 windows. Bradley is currently operating at 100% capacity. The windows usually sell for $20.00 each. The costs for each window follow:

Direct Materials 5.00

Direct Labor 3.00

Variable factory oh 2.00

Fixed factory oh 4.00

Total $14.00

The Army has offered to buy 10,000 windows for $12.00 each for barracks. Bradley should:

1. Reject the order because the company will lose $20,000 on the order

2. Accept the offer because the company will realize $40,000 in additional contribution margin

3. Accept the offer because the company will realize $20,000 in additional contribution margin

4. Reject the offer because it currently does not have enough capacity to accept the order.