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 86,400 units per year is:

Direct materials	$	1.80
Direct labor	$	3.00
Variable manufacturing overhead	$	.50
Fixed manufacturing overhead	$	3.75
Variable selling and administrative expenses	$	1.40
Fixed selling and administrative expenses	$	2.00

The normal selling price is $22 per unit. The companys capacity is 104,400 units per year. An order has been received from a mail-order house for 1,500 units at a special price of $19.00 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.)