Peters Company produces a product with the following unit cost.

Direct Materials	$2.75
Direct Labour	$1.25
Variable Overhead	$4.00
Fixed Overhead	$2.50
Unit Cost	$10.50

Fixed selling costs are $600,000 per year and variable selling costs are $1.50 per unit sold.

Production capacity is 500,000 units per year. However, the company expects to produce only 300,000 units next year. The product normally sells for $15 each. A customer has offered to buy 150,000 units for $10 each. The units would be sold in an area outside the market area currently served.

Q. Total incremental costs associated with the special order is?

a) $1,237,500

b) $1,342,000

c) $1,387,500

d) $1,425,000

Q. If the firm produces the special order, the effect on income would be?e

a) $75,000 increase

b) $90,000 increase

c) $2,500 decrease

d) $12,500 decrease

Can you please explain how to get the answer, thank you.