Lakeside Inc. produces a product that currently sells for $52.00 per unit. Current production costs per unit include direct materials, $14; direct labor, $16; variable overhead, $7.00; and fixed overhead, $7.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 8,400 units at $38.40 per unit. Lakeside currently has unused production capacity. Required: a. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization.

ANSWER:

Increase in operating income by: ___________________