Q2

Shanghai Exports, LTD produces wall mounts for flat panel television sets. The forecasted income statement for 2014 is as follows:

Shanghai Exports, LTD

Bugdgeted Income Statement

For the Year 2014

Sales ($ 44 per unit)$ 4,400,000

Cost of good sold ($ 32 per unit)(3,200,000)

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Gross profit1,200,000

Selling expenses ($ 3 per unit)(300,000)

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Net income$ 900,000

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Additional Information (1) Of the production costs and selling expenses, $800,000 and $100,000, respectively, are fixed. (2) Shanghai Exports, LTD received a special order from a hospital supply company offering to buy 12,500 wall mounts for $30. If it accepts the order, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $30."

Calculate the net benefit (cost) of accepting the special order.