Exercise 23-2 Accept new business or not LO A1 Farrow Co. expects to sell 400,000 units of its product in the next period with the following results Sales (400,000 units) Costs and expenses $6,000,000 Direct materials Direct labor Overhead Selling expenses Administrative expenses 800,000 1,600,000 400,000 600,000 1,028,00e 4,428,000 $1,572,000 Total costs and expenses Net income The company has an opportunity to sell 40,000 additional units at $12 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. (1) total overhead would increase by 16% and (2) administrative expenses would increase by $172,000 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit. Normal Volume Total Costs and expenses Direct materials Direct labor Selling expenses Administrative expenses Total costs and expenses Incremental income (loss) from new business