Exercise 25-17 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,e00 units) Costs and expenses $6,000,e0e Direct materials Direct labor Overhead Selling expenses Administrative expenses 800,000 1,600,000 400,000 600,000 1,028,000 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. However, the additional volume would create the tollowing 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. Combined Normal Volume Additional Total Costs and expenses Total costs and expenses Incremental income (loss) from new business $ 0 $% Should the company accept or reject the offer? O The company should reject the offer O The company should accept the offer