Lakeside Incorporated produces a product that currently sells for $44 per unit. Current production costs per unit include direct materials, $12.00; direct labor, $14.00; variable overhead, $7.00; and fixed overhead, $7.00. Lakeside has received an offer from a nonprofit organization to buy 8,400 units at $34.00 per unit. Lakeside currently has unused production capacity.

Required:

1. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization.
2. Should Lakeside accept this special sales order?

Lakeside Incorporated is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $450,000, with an estimated salvage value of $40,000. Lakesides cost of capital is 9%. Lakeside Incorporated uses a straight-line depreciation method.

Required:

Calculate the payback period and the accounting rate of return for the new production equipment.

Note: Round your answers to 2 decimal places.