Jones Products manufactures and sells to wholesalers approximately 200,000 packages per year of underwater markers at $3.94 per package. Annual costs for the production and sale of this quantity are shown in the table. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $256, 000 64,000 192,000 80,000 53,000 $645,000 A new wholesaler has offered to buy 33,000 packages for $3.31 each. These markers would be marketed under the wholesaler's name and would not affect Jones Products's sales through its normal channels. A study of the costs of this additional business reveals the following: Direct materials costs are 100% variable. Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 1/2 times the usual labor rate. 25% of the normal annual overhead costs are fixed at any production level from 150,000 to 300,000 units. The remaining 75% of the annual overhead costs are variable with volume. Accepting the new business would involve no additional selling expenses. Accepting the new business would increase administrative expenses by a $4,000 fixed amount. Total Per Unit Amounts Normal New Normal Volume Business Volume $ 3.94 $ 3.43 X $ 788,000 New Business Combined $ 1,131,390 $ 901, 190 Sales Variable costs: Direct materials Direct labor Variable overhead 1.280 0.320 0.770 X 1.280 0.480 0.770 256,000 64.000 153,600 42,240 15,840 25,344 X 298,240 79,840 178,944 Total fixed costs Contribution margin 2.370 1.570 2.530 0.900 473,600 314,400 83,424 1,047,966 557,024 344,166 $ $ Fixed costs: Fixed overhead Selling expenses Administrative expenses 38,400 80,000 53,000 0 38,400 0 80,000 5,000 X 58,000 0 5,000 176,400 24,766 $ 167,766 Total fixed costs Operating income 171,400 $ 143,000 $