Cayman Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $3.91 per package. Annual costs for the production and sale of this quantity are shown in the table.

Direct materials	$	384,000
Direct labor		96,000
Overhead		288,000
Selling expenses		120,000
Administrative expenses		80,000
Total costs and expenses	$	968,000

A new wholesaler has offered to buy 50,000 packages for $3.45 each. These markers would be marketed under the wholesaler%u2019s name and would not affect Cayman Products%u2019 sales through its normal channels. A study of the costs of this additional business reveals the following:

%u2022	Direct materials costs are 100% variable.
%u2022	Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at one-and-one-half times the usual labor rate.
%u2022	20% of the normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 80% of the annual overhead cost is variable with volume.
%u2022	Accepting the new business would involve no additional selling expenses.
%u2022	Accepting the new business would increase administrative expenses by a $4,000 fixed amount.