Relax Products manufactures t-shirts. It has the following costs when its production level is 70,000 units (t-shirts):

	Total costs for 70,000 units
Direct materials	$189,000
Direct labor	24,500
Variable manufacturing overhead	77,000
Fixed manufacturing overhead	70,000
Total manufacturing costs	$360,500

The company's relevant range extends to 82,000 units. Relax has received a special order for 7,000 t-shirts at a special price of $40,250 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Relax, which would allow Relax to save $0.25 per t-shirt in direct materials when manufacturing this special order. Relax has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order.

1) Complete the following incremental analysis to determine the impact on Relax's operating income if it accepts this special order. (Round all per unit amounts to the nearest cent, $X.XX, and all other amounts to the nearest whole dollar. Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.)

		Total Order
Incremental Analysis of Special Sales Order Decision	Per Unit	(7,000 units)
Revenue from special order
Less variable expense associated with the order:
Direct materials
Direct labor
Variable manufacturing overhead	_________	__________
Contribution margin	========
Less: Additional fixed expenses associated with the order
Increase (decrease) in operating income from the special order		=========

2) What will happen to Relax's operating income if it accepts this special order?