Exercise 10-2 Accept new business or not LO A1 Farrow Co. expects to sell 200,000 units of its product in the next period with the following results. Sales (200,000 units) $3,000,000 Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative expenses 400,000 800,000 200,000 300,000 514,000 Total costs and expenses Net income 2,214,000 $ 786,000 The company has an opportunity to sell 20,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: () total overhead would increase by 16% and (2) administrative expenses would increase by $86,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit. VolumeVolumeTotal Costs and expenses Total costs and expenses Incremental income (loss) from new business Should the company accept or reject the offer? The company should reject the offer The company should accept the offer