Carla Vista Pets has recently started to manufacture talking toy pets.

The cost structure to manufacture 12,300 of these toy pets is as follows:

Direct materials ($33 per pet)

$405,900

Direct labour ($25 per pet)

307,500

Variable overhead ($10 per pet)

123,000

Allocated fixed overhead ($25 per pet)

307,500

Total

$1,143,900

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A

Carla Vista Pets is approached by Vaughn Inc., which offers to make the toy pets for $78 per unit.

Using incremental analysis, determine whether Carla Vista Pets should accept this offer under each of the following independent assumptions: