Problem 1. Geppettos Workshop is a toy manufacturing firm. It makes all different kinds of wooden toys, which are sold to retailers all over Canada. One of the most popular toys is a wooden puzzle with all the letters of the alphabet. The puzzle generally sells for $300. The standard cost card for the puzzle follows:

DM (2.1 board feet of wood @ $25 per linear foot) $52.50

DL (.25 hour @ $25/hour) 6.25

VOH (3 MH @ 1.5/hour) 4.50

FOH (3 MH @ 25.50/hour) 76.50

TOTAL COST $139.75

Due to the world-wide economic slowdown, Geppettos has not been producing at its normal full capacity, which is 450,000 MH. For the upcoming month, the budget will be based on an expected 325,000 MH.

A potential customer from Bribane has approached Geppettos about buying 40,000 puzzles. The customer would require that some elements of the puzzle be modified in order to better appeal to its target market. Most of the design changes would not entail increased costs. However, the client wants one modification that would require DL time to be doubled. The client is offering to pay $100 per puzzle if the puzzles can be delivered by the end of the upcoming month.

Compute the impact on net income of accepting the offer.