She pany is the ator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,010,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Per Undergarment Total Direct materials $1.91 $1,929,100 Direct labor 0.41 414,100 Variable manufacturing overhead 0.96 969,600 Fixed manufacturing overhead 1.48 1,494,800 Variable selling expenses 0.31 313,100 Totals $5.07 $5,120,700 The U.S. Army has approached Sheridan Fiber and expressed an interest in purchasing 250,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.03 per undergarment to cover all other costs and provide a profit. Presently, Sheridan Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Sheridan Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.