Premium Co. produces park benches. A customer has offered Premium Co. $800 per unit for 100 units. To fill the order, Premium would incur unit-level costs of $600 per unit and batch-level costs of $15,000. Premium Co. also incurred $20,000 of product-level costs to design the bench and $200,000 of facility-level costs. Premium Co. can rent out its excess capacity for $12,000 if it does not accept the special order. Based on your quantitative analysis, should Premium Co. accept the special order? What is the effect on profit?

Multiple choice question. Please show your work step by step. :-)

Yes, Premium Co. should accept the special order because it will increase profit by $5,000.

Yes, Premium Co. should accept the special order because it will increase profit by $7,000.

No, Premium Co. should not accept the special order because it will decrease profit by $7,000.

No, Premium Co. should not accept the special order because it will decrease profit by $5,000.