Perry Industries has an annual plant capacity of $62,000$ units; current production is $52,000$ units per year. At the current production volume, the variable cost per unit is $$34\mathrm{.}00$ and the fixed cost per unit is $$4\mathrm{.}40.$ The normal selling price of Perry's product is $$49\mathrm{.}00$ per unit. Perry has been asked by Galvano Company to fill a special order for $7,000$ units of the product at a special sales price of $$28\mathrm{.}00$ per unit. Galvano is located in a foreign country where Perry does not currently operate. Galvano will market the units in its country under its own brand name, so the special order is not expected to have any effect on Perry's regular sales.

Read the requirements.

Requirement $1.$ How would accepting the special order impact Perry's operating income? Should Perry accept the special order?

Complete the following incremental analysis to determine the impact on Perry'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

Incremental Analysis of Special Sales Order Decision

units$)$

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