Problem 4 Special order

Oliver is currently selling 9,800 units and their maximum capacity is 10,000. The normal selling price is $250, variable manufacturing costs are $150 and the normal sales commission is 10% of selling price. Fixed costs are $400,000. They are approached regarding a special order for 200 units at a price of $160. None of their current customers will be affected and the sales commission will be 10% of the sales price. What effect will this have on income?

Now suppose the company policy is that the sales commission on a special order is a flat $2,000 but a special machine must be rented at a cost of $3,000 per year and the offered price is $135. What effect would this have on income?

Finally, suppose the original facts but the current demand is 9,700 and the order is 400 or nothing. What is the effect on income?