Exercise 10-3 Accept new business or not LO A1 Goshford Company produces a single product and has capacity to produce 135,000 units per month. Costs to produce its current sales of 108,000 units follow. The regular selling price of the product is $112 per unit. Management is approached by a new customer who wants to purchase 27,000 units of the product for $81.00 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company's regular selling territory, so there will be a $7.20 per unit shipping expense in addition to the regular variable selling and administrative expenses. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Totals Costs at Per Unit 108,000 Units $12.50 $1,350,000 15.00 1,620,000 15.00 1,620,000 17.50 1,890,000 15.00 1,620,000 15.00 1,620,000 $90.00 $ 9,720,000 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $81.00 per unit. Normal Volume Additional Volume Combined Total Costs and expenses: Total costs and expenses Net income (loss) 0 0 0 0 0 0 $ $ $ Determine whether management should accept or reject the new business. Accept O Reject