Lamont Industries has an annual plant capacity of 75,000 units; current production is 53,000 units per year. At the current production volume, the variable cost per unit is $27.00 and the fixed cost per unit is $4.80. The normal selling price of Lamont's product is $43.00 per unit. Lamont has been asked by Kaymond Company to fill a special order for 16,000 units of the product at a special sales price of $23.00 per unit. Kaymond is located in a foreign country where Lamont does not currently operate. Kaymond will market the units in its country under its own brand name, so the special order is not expected to have any effect on Lamont's regular sales. Read the requirements Requirement 1. How would accepting the special order impact Lamont's operating income? Should Lamont accept the special order? Complete the following incremental analysis to determine the impact on Lamont's operating income if it accepts this special order. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.) Total Order (16,000 units) Incremental Analysis of Special Sales Order Decision Revenue from special order Less expenses associated with the order: Less: Variable manufacturing cost Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order This current cost per unit is based on the following calculations: (Click the icon to view the information.) Nesbitt Enterprises manufactures one of the components used to assemble its main company product Specialty Products, Inc., has offered to make the component at a cost of $12.90 per unit. Nesbitt Enterprises' current cost is $17.25 per unit of the component, based on the 80,000 components that Nesbitt Enterprises currently produces. None of Nesbitt Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $26,000 of contribution margin per year. Read the requirements. Requirement 1. If Nesbitt Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Make Outsource Incremental Analysis Outsourcing Decision Component Component Difference Variable costs Plus: Fixed costs Total cost of 80,000 components Less: Profit from another product Net cost 5.75 Direct material per unit... $ Direct labor per unit .. Variable manufacturing overhead per unit .. 5.25 2.75 3.50 Fixed manufacturing overhead per unit 17.25 Total manufacturing costs per unit