Sequoia Paper Products, Inc., manufactures boxed stationery for sale to specialty shops. Currently, the company is operating at $85$ percent of capacity. A chain of drugstores has offered to buy $30,000$ boxes of Sequoia$$s blue$-$bordered thank$-$you notes as long as the box can be customized with the drugstore chain$$s logo$.$ While the normal selling price is $$5\mathrm{.}60$ per box, the chain has offered just $$3\mathrm{.}40$ per box. Sequoia can accommodate the special order without affecting current sales. Unit cost information for a box of thank$-$you notes follows:

Direct materials $$1\mathrm{.}95$

Direct labor $0\mathrm{.}39$

Variable overhead $0\mathrm{.}06$

Fixed overhead $1\mathrm{.}95$

Total cost per box $$4\mathrm{.}35$

Fixed overhead is $$445,000$ per year and will not be affected by the special order. Normally, there is a commission of $7$ percent of price; this will not be paid on the special order since the drugstore chain is dealing directly with the company. The special order will require additional fixed costs of $$13,900$ for the design and setup of the machinery to stamp the drugstore chain$$s logo on each box.

Required:

$1.$ Which alternative is more cost effective and by how much?

Accept the special order

The operating income would increase by $