James Industries has an annual plant capacity of 80,000 units, current production

is 65,000 units per year. At the current production volume, the variable cost per unit is

$40 .00, and the fixed cost per unit is $4.50. The normal selling price of Castillo's product

is $60 .00 per unit. James has been asked by Miami Company to fill a special

order for 8,000 units of the product at a special sales price of $38 .00 per unit. Miami

is in a foreign country where James does not currently operate. Miami will

market the units in its country under its own brand name, so the special order is not expected

to have any effect on James's regular sales.

Requirements:

1. How would accepting the special-order impact James's operating income? Should

James accept the special order.

2. How would your analysis change if the special-order sales price were to be $50 .00 per

unit and James would have to pay an attorney a fee of $35,000 to make sure it is

complying with export laws and regulations relating to the special order?