Near the end of 2020, X Company had produced and sold 62,400 units of its only product. Costs for these units were: Total Per-Unit Direct materials $137,280 $2.20 Direct labor 93,600 1.50 Variable overhead 193,440 3.10 Fixed overhead 124,800 2.00 Variable selling and administration 90,480 1.45 Fixed selling and administration 68,640 1.10 Total $708,240 $11.35 Just before the year ended, a company offered to buy 4,460 units for $14.20 each. X Company had the capacity to produce the additional 4,800 units, but because the special order product was slightly different than the regular product, direct material costs were expected to increase by $0.2 per unit, and some special equipment would have to be rented for a total of $17,000.

5. Assume that if X Company had accepted the special order, it would have had to lower the selling price of its regular product to prevent the loss of regular customers. The price of its regular product is normally set at 20% above the total manufacturing cost per unit, but it would have to reduce it to $9.99 per unit. The effect of lowering the selling price would have been to decrease company profits by