Goshford Company produces a single product and has capacity to produce 100,000 units per month. Costs to produce its current sales of 77,000 units follow. The regular selling price of the product is $102 per unit. Management is approached by a new customer who wants to purchase 22,000 units of the product for $76 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead, and no additional fixed selling and administrative expenses. The customer is not in the company's regular selling territory, so there will be a $5 per unit shipping expense in addition to the regular variable selling and administrative expenses.

Per Unit

Costs at 77,000 Units

Direct materials

$11.60

$893,200

Direct labor

14.00

1,078,000

Variable manufacturing overhead

8.50

654,500

Fixed manufacturing overhead

11.60

893,200

Variable selling and administrative expenses

12.00

924,000

Fixed selling and administrative expenses

11.00

847,000

Totals

$68.70

$5,289,900

Calculate the net income if the new business is accepted.

	Normal Volume	Additional Volume	Combined Total
Costs and expenses:
Total costs and expenses
Incremental income (loss) from new business
Should Goshford accept or reject the new business?