Exercise 8-6

Monty Company is a leading manufacturer of sunglasses. One of Montys products protects the eyes from ultraviolet rays. An upscale sporting goods store has contacted Monty about purchasing 19,200 pairs of these sunglasses. Montys unit manufacturing cost, based on a full capacity of 113,000 units, is as follows:

Direct materials	$7
Direct labor	4
Manufacturing overhead (60% fixed)	15
Total manufacturing costs	$26

Monty also incurs selling and administrative expenses of $75,500 plus $3 per pair for sales commissions. The company has plenty of excess manufacturing capacity to use in manufacturing the sunglasses. Montys normal price for these sunglasses is $43 per pair. The sporting goods store has offered to pay $37 per pair. Since the special order was initiated by the sporting goods store, no sales commission will be paid. What would be the effect on Montys income if the special order were accepted?

Montys income will

by $