Play Company makes plastic rattle for toddlers. The rattle is generally marketed through exclusive retailers located in upscale shopping malls. In late 2023 the president of the company, was considering an alternative marketing plan for 2024 that was presented to her by the marketing manager. Based on sales from January through October 2023, President expected that 2024 sales would amount to 100,000 units.

Manager's alternative marketing plan is presented below: 2024 Marketing Plan: At the present time, we sell the product to retailers for $15.00 per rattle. Retailers generally charge the consumers between $16 and $16.50. If we cut our selling price to retailers to $14.00, I expect that the product will do much better. The retailers' increased markup will give them the incentive to display our product more prominently and to promote it more vigorously to customers. We should support this strategy by supplying more promotional materials to retailers, which I expect would be an increase of $2,000 in Advertising and Promotion costs.

Based on the price cut and the increase in advertising and promotion, I expect that we will be able to boost our sales volume by 20 percent to 120,000 units in 2024. Diana received cost data from the companys CFO. CFO expects that the cost data below are also reliable estimates for 2024 for a production volume up to 150,000 units. Beyond 150,000 units, the company would have to rent additional machines (with a capacity of 50,000 units each), which would increase fixed manufacturing overhead costs by $20,000 per machine.

Sales Price (Current) = $15 per rattle

Sales Price (Proposed) = $14 per rattle

Units Sold (Current) = 100000

Units Sold (Proposed) = 120000

Cost Data Manufacturing Costs for rattles (based on production volume of 100,000 units):

Direct Material = $1.60 per unit

Direct Labor = $0.80 per unit

Packaging = $0.25 per unit

Variable Manufacturing Overhead = $1.20 per unit

Fixed Manufacturing Overhead = $360,000 with expected increase of $20,000 per machine after relevant range

Selling and Administrative Costs for rattles (based on sales volume of 100,000 units):

Sales Commissions = $1.50 per unit

Shipping Costs = $0.75 per unit

Advertising and Promotion (fixed) = $90,000 with expected increase of $2,000

Fixed Selling and Admin Expenses = $150,000

The company has been approached by the government, which is seeking to buy 75,000 rattles for its day care centers in 2024. The proposed government contract states that the government would pay the company a price of $9.00 per rattle. If the company decides to accept this special order, they would avoid packaging costs for this contract as well as all variable selling and administrative costs. The companys capacity is limited to only 150,000 units. If they accept the government contract, they will need to increase their capacity by renting an additional machine.

Assume that The Company does not adopt the proposed Marketing Plan and that the companys production and sales level without the government contract is expected to be 100,000 rattles for 2024.

What is the increase or (decrease) in Net Income that Childs Play would recognize if they accept this special order?