Haynes Company has been approached by a new customer with an offer to purchase 1,500 units of Hayness product at a price of $8 each. The new customer is geographically separated from Hayness customers, and there would be no effect on existing sales. Haynes normally produces 10,000 units but only plans to produce and sell 8,000 in the coming year. The normal sales price is $11.50 per unit. Unit cost information is as follows:

Direct Materials	$3.00
Direct Labor	1.60
Variable Overhead	1.30
Fixed Overhead	4.00
Unit Cost	$9.90

If Haynes accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity. However, the distribution center at the warehouse is operating at full capacity and would need to add capacity costing $2,000.

Required: Determine the impact on the companys profits if the special order is accepted.

1.	Per Unit	Total (1,500 units)
Incremental Revenue:	$ 8.00	$ 12,000
Incremental Costs:
Direct Materials	$3.00	4,500
Direct Labor	1.60	2,400
Variable Overhead	1.30	1,950
Addl Warehouse Cost	1.33	2,000
Incremental Income if accepted	$ .77	$ 1,150

How did they get Ad warehouse cost of 1.33