Farrow Co. expects to sell 400,000 units of its product in the next period with the following results.

Sales (400,000 units)	$	6,000,000
Costs and expenses
Direct materials		800,000
Direct labor		1,600,000
Overhead		400,000
Selling expenses		600,000
Administrative expenses		1,028,000
Total costs and expenses		4,428,000
Net income	$	1,572,000

The company has an opportunity to sell 40,000 additional units at $13 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 15% 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 $13 per unit. Should the company accept or reject the offer?

part two

Gilberto Company currently manufactures 69,000 units per year of one of its crucial parts. Variable costs are $2.15 per unit, fixed costs related to making this part are $79,000 per year, and allocated fixed costs are $66,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.40 per unit guaranteed for a three-year period. Calculate the total incremental cost of making 69,000 and buying 69,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?