Goshford Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current sales of 116,000 units follow. The regular selling price of the product is $112 per unit. Management is approached by a new customer who wants to purchase 29,000 units of the product for $77.40 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 companys regular selling territory, so there will be a $6.60 per unit shipping expense in addition to the regular variable selling and administrative expenses.

	Per Unit				Costs at 116,000 Units
Direct materials		$	12.50			$	1,450,000
Direct labor			15.00				1,740,000
Variable manufacturing overhead			12.00				1,392,000
Fixed manufacturing overhead			17.50				2,030,000
Variable selling and administrative expenses			15.00				1,740,000
Fixed selling and administrative expenses			14.00				1,624,000
Totals		$	86.00			$	9,976,000

Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $77.40 per unit.

Exercise 23-3 Accept new business or not LO A1 Goshford Company produces a single product and has capacity to produce 145,000 units per month. Costs to produce its current sales of 116,000 units follow. The regular selling price of the product is $112 per unit. Management is approached by a new customer who wants to purchase 29,000 units of the product for $77.40 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 $6.60 per unit shipping expense in addition to the regular variable selling and administrative expenses. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Totals Costs at Per Unit 116,000 Units $ 12.50 $1,450,000 15.00 1,740,000 12.00 1,392,000 17.50 2,030,000 15.00 1,740,000 14.00 1,624,000 $ 86.00 $9,976,000 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $77.40 per unit. Normal Volume Additional Volume Combined Total $ 0 Sales Costs and expenses: 0 0 0 0 0 0 0 0 0 0 Total costs and expenses Net income (loss) $ 0 $ 0 $ 0 Determine whether management should accept or reject the new business. Accept O Reject