Bultaco, Inc. has purchased a forming machine. It cost $20,000 and has an estimated life of ten years. The following annual product sales and expenses are projected:

Sales		$22,000
Expenses:
Plastic, etc. (required in making product)	$10,000
Salaries	$6,000
Depreciation	$1,600	$17,600
Operating Income		$4,400

(Ignore income taxes in this problem.) The payback period on the new machine is closest to which of the following?

		1.4 years.
		2.7 years.
		3.3 years.
		5.0 years.

The following are the Newt Company's unit costs of making and selling an item at a volume of 10,000 units per month, which represents the company's capacity:

Manufacturing:
Direct Materials	$1.00
Direct Labour	$2.00
Variable Overhead	$0.50
Fixed Overhead	$0.90
Selling and Administrative:
Variable	$1.50
Fixed	$0.60

Present sales amount to 9,000 units per month. An order has been received from a customer in a foreign market for 2,500 units. The order would not affect current sales. Fixed costs, both manufacturing and selling and administrative, are constant within the relevant range between 8,000 and 10,000 units per month. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume direct labour is a variable cost. How much will the company's operating income be increased or (decreased) if it prices the 1,000 units in the special order at $6 each?

		($500).
		$400.
		$1,000.
		$2,500.