Ryan Company produces a single product. The cost of producing and selling a single unit of this product at the company's maximum capacity level of 50,000 units per month is as follows: Total Per Unit Direct materials Direct labor $2,600,000 $52.00 $250,000 $5.00 Variable manufacturing overhead $75,000 $1.50 Fixed manufacturing overhead $660,000 $13.20 Variable selling and administrative expense $80,000 $1.60 Fixed selling and administrative expense $450,000 $9.00 The normal selling price of the product is $100 per unit. An order has been received from an overseas customer for 5,000 units at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.00 less per unit on this order than on normal sales. REQUIRED: Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $75 per unit. By how much would this special order increase (decrease) the company's net operating income for the month? The company's net operating income would (increase/decrease): by how much? Suppose the company is manufacturing and selling 48,000 units when the special order is received from the overseas customer. Maximum capacity for the company is 50,000 units. By how much would this special order increase (decrease) the company's net operating income for the month? The company's net operating income would (increase/decrease): by how much? Lyons Enterprises manufactures an optical switch that it uses in its final product. Lyons incurred the following manufacturing costs when it produced 72,000 units last year: Direct Materials Direct Labor Variable Overhead Fixed Overhead Total Manufacturing Cost of 72,000 units $720,000 $10.00 per unit $180,000 $2.50 per unit $216,000 $3.00 per unit $468,000 $1,584,000 $6.50 per unit $22.00 per unit Lyons does not yet know how many switches it will need this year; however another company has offered to sell Lyons the switch for $17 per unit. REQUIRED: Assume that Lyons determines that demand for the switch will be 72,000 for the upcoming year, that the idle capacity cannot be used for any other purpose and all fixed costs are unavoidable. What is the difference in profitability for Lyons between making or buying the switch? Assume that Lyons determines that demand for the switch will be 84,000 units, that Lyons would be able to use the idle capacity to manufacture a product that will earn a $120,000 operating income. In addition, $150,000 of fixed costs are avoidable if they buy the switch. What is the difference in profitability for Lyons between making or buying the switch?