Exercise 12-9 Special Order [LO12-4]

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 85,200 units per year is:

Direct materials	$	1.60
Direct labor	$	3.00
Variable manufacturing overhead	$	.70
Fixed manufacturing overhead	$	4.35
Variable selling and administrative expenses	$	1.20
Fixed selling and administrative expenses	$	2.00

The normal selling price is $20 per unit. The companys capacity is 115,200 units per year. An order has been received from a mail-order house for 2,500 units at a special price of $17.00 per unit. This order would not affect regular sales.

Required:

1.	If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the companys total fixed costs.)