Problem 2 Regal produces a single product. The companys March 2014 income statement is as follows: Sales (1,200 x $120) $144,000 Cost of goods sold - 108,000 Gross profit $ 36,000 Selling and administrative 10,000 Net income $ 26,000 There were no beginning or ending inventories of work-in-process or finished goods. Regal's full manufacturing costs were as follows: Direct materials (1,200 units x $20) $ 24,000 Direct labor (1,200 units x $32) 38,400 Variable manufacturing overhead (1,200 units x $18) 21,600 Fixed manufacturing overhead 24,000 Total $108,000 Average cost per unit $90 Selling and administrative expenses are all fixed. Regal just received a special order from a firm in Mexico to purchase 900 units at $110 each. The order will not affect the selling price to regular customers. Required: a. Prepare a differential analysis of the relevant costs and revenues associated with the decision to accept or reject the special order, assuming Regal has excess capacity. b. Determine the net advantage or disadvantage (profit increase or decrease) of accepting the order, assuming Regal does not have excess capacity.