PQR Company manufactures special box for transportation of books. Currently, the company is operating at 90 percent of capacity. A customer of PQR Company has offered to buy20,000 boxes. While the normal selling price is $6.00 per box, the customer has offered just $4.20 per box. PQR Company can accommodate the Special order without affecting current sales. The special order will require additional xed costs of $18,000 for the design and setup of the machinery. Unit cost information for a box given asfollows:

Direct materials

$1.50

Direct labour

0.20

Variable overhead

0.10

Fixed overhead

5.10

Total unit cost

$6.90

Which alternative is more cost effective and by how much?

Select one:

a.

There is a $48,000 increase in operating income if the special order is accepted.

b.

There is a $30,000 increase in operating income if the special order is rejected.

c.

There is a $30,000 increase in operating income if the special order is accepted.

d.

There is a $48,000 increase in operating income if the special order is rejected.