Problem 3. Outdoorsy Company is a new company that makes only one product: a set of titanium walking sticks. Each set is custom made to the clients measurements and specifications. The average absorption costing unit cost has been determined as follows:

DM $25.00

DL 15.00

VOH 13.75

FOH 49.00

Total Unit Cost $102.75

Overhead in the firm is applied on the basis of machine hours. Each set of walking sticks requires 5 machine hours. The overhead rates used to determine the unit cost are factory wide rates based on an expected level of activity for the year of 4,000 machine hours. The firm was built to handle 8,000 machine hours per year, since it is expecting a rapid increase in sales after the first year.

Selling and administrative costs for the year are $6 per unit variable and $60,000 per year fixed.

On November 5, a tour company that takes expeditions climbing on Mount Kilimanjaro has approached Outdoorsy with an offer to buy 300 identical sets of walking sticks to be used in its operations. These products would use slightly less expensive materials, saving $5 per unit in direct materials. Machine hours per unit would remain at 5 hours. There would be no impact on fixed selling and administrative costs. The tour company has agreed to pay shipping. The offer price is $75 per unit.

Assume that sales for the first year (January through December) are running as expected and the firm will sell 800 sets of walking sticks without this offer. What would be the impact on net income of accepting the offer from the tour company?