Jones Products manufactures and sells to wholesalers approximately 400,000 packages per year of underwater markers at $3.84 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 $ 512,000 128,000 384,000 160,000 107.000 $1,291,000 A new wholesaler has offered to buy 67,000 packages for $3.44 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 35% of the normal annual overhead costs are fixed at any production level from 350,000 to 500.000 units The remaining 65% of the annual Overhead costs are variable with volume Accepting the new business would involve no additional selling expenses Acceptina the new business would increase administrative expenses by a $5.000 fixed amount . Per Unit Amounts Normal New Normal Volume Business Volume $ 3.84 $ 3.44 $ 1.536,000 Total New Combined Business $ 225,120 X $ 1,761,120 X Sales Variable costs: Direct materials Direct labor Variable overhead 1.280 0.320 0.720 X 0.000 2.320 0.000 $ 1.280 0.480 0.720 X 0.000 2.480 0.000 X 512,000 128,000 288,000 X 928,000 1,856,000 (320,000) 85,760 32,160 48,240 % 166,160 x 332,320 (107,200) 597 760 160,160 336,240 X 1,094.160 2,188,320 (427,200) Total variable costs 0 Fixed costs Fixed overhead Selling expenses Administrative expenses 0 DO 96,000 160,000 107.000 363,000 726.000 3.000 3,000 $ 6,000 96,000 160,000 110,000 366,000 732.000 n Total fixed costs Onerating income