Jones Co. received an offer to buy 3800 units of its product for 7.50 per unit. Jones Co normally produces 12,000 units but only plans to produce and sell 8,000 units in the coming year. The normal sales price is $12 per unit. Unit cost info is:

Direct Materials: $2.00

Direct labor: $3.10

Variable overhead: $1.80

Fixed overhead?: $2.00

Part A.

If Jones Co. accepts the order, no fixed manufacturing activities will be affected. Should Jones Co. accept the order?

a. Yes, because income will increase by $5,320

b. No, because income will decrease by $5,320

c. No, because income will decrease by$2,280

d. Yes, because income will increase by $2,280

Part B.

Refer to above, Jones Co.s warehouse distribution center is operating at full capacity and would have to add capacity costing $1,000 for every 5,000 units to be packed and shipped. Should Jones Co. accept the special order?

a. Yes, because income would increase by $6,320.

b. No, because income would decrease by $6,320.

c. No, because income would decrease by $3,280.

d. Yes, because income would increase by $3,280.