Joseph Company incurs per-unit costs of $11 in in variable costs and $4 in fixed costs to produce its main product, which sells for $24. A new customer in the market, Katherine, offers to purchase 2,500 units at $16 each.

If the special offer is accepted, the units sold to Katherine would have to be produced with capacity that was otherwise going to be used to produce units sold to other customers.

Assuming Joseph Company is adopting a financial perspective, which of the following is true regarding the decision of whether or not to accept Katherine's special order?

1. Joseph is indifferent because fixed costs are the same regardless.
2. Joseph should accept the offer, because each unit sold to Katherine increases profits by $1.
3. Joseph should decline the offer, because each unit sold to Katherine decreases profits by $8.
4. Joseph should accept the offer because each unit sold to Katherine increases profits by $5.