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Lamarche Company manufactures a unique product for a well-known Canadian retailer. For a particular model of this product, the production and selling costs are as

Lamarche Company manufactures a unique product for a well-known Canadian retailer. For a particular model of this product, the production and selling costs are as follows: Production costs - variables Sales costs - variables Production costs - fixed Sales costs - fixed Unit selling price Current level of sales and production Capacity $ 6.50 per unit $ 1.75 per unit $ 34,000 $ 25,000 $ 13.00 20,000 units 20,000 units Lamarche Company recently received a request for 10,000 units of this model from a customer as a one-time special order. The selling price to this customer would be $ 10.00 per unit. If the special order is fulfilled in-house by taking sales away from the general market, there would be a reduction in fixed selling costs of $ 13,000. Alternatively, a competitor called Labelle Company, a company known to have made a lower quality unit, offered to supply the 10,000 units to Lamarche for $ 8.00 per unit. If Lamarche purchases the units from Labelle, because the units are of lower quality, Lamarche must spend an additional $ 1.00 per unit on a special finishing process. Under this option, the variable selling charge per unit would increase to $ 0.75 per unit. To manage the purchase and the finishing process, Lamarche will also incur a cost of $ 1,500 for the entire order. Work to be done (ignore tax implications): A) Calculate the operating income of the Lamarche company if the special order is not taken. (3 points) B) Calculate the operating income of the Lamarche company assuming the special order is fulfilled internally by diverting sales from the general market. (4 points) C) Calculate the operating income of the Lamarche Company assuming the special order is fulfilled by the purchase of Labelle Company. (5 points)

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