Midwest Company manufactures lamps. Shop Smart, a large retail merchandiser, wants to buy 200,000 lamps from Midwest Company for $12 each. The lamp would carry Shop Smarts name and would be sold in its stores.

Midwest Company normally sells 420,000 lamps a year at $15 each; its production capacity is a total of 500,000 units a year. Cost information for the lamps is as follows:

Production costs: Variable production costs $6 per unit Fixed manufacturing overhead ($2,100,000 / 420,000 units) $5 per unit Selling and administrative expenses: Fixed ($840,000 / 420,000 units) $2 per unit

Shop Smart has indicated that the company is not interested in signing a contract for less than 200,000 lamps. Total fixed costs will not change regardless of whether the Shop Smart order is accepted.

By how much will overall Midwest Companys net income change if the Shop Smart order is accepted?

Midwest Company net income will DECREASE by $120,000 if the order is accepted.

Midwest Company net income will DECREASE by $500,000 if the order is accepted.

Midwest Company net income will INCREASE by $200,000 if the order is accepted.

Midwest Company net income will INCREASE by $120,000 if the order is accepted.

Midwest Company net income will DECREASE by $200,000 if the order is accepted.

Midwest Company net income will INCREASE by $500,000 if the order is accepted.