Show me the steps to solve D$.$ Lawrance designs and manufactures fashionable men$$s clothing. For the coming year, the company has scheduled production of $40,000$ suede jackets. Budgeted costs for this product are as follows:

Unit Costs $(40,000$ Units$)$ Total

Variable manufacturing costs $ $50$ $ $2,000,000$

Variable selling expenses $20800,000$

Fixed manufacturing costs $10400,000$

Fixed operating expenses $5200,000$

Total costs and expenses $ $85$ $ $3,400,000$

The management of D$.$ Lawrance is considering a special order from Discount Apparel for an additional $2,000$ jackets. These jackets would carry the Discount Apparel label, rather than the D$.$ Lawrance label. In all other respects, they would be identical to the regular D$.$ Lawrance jackets.

Although D$.$ Lawrance regularly sells its jackets to retail stores at a price of $$120$ each, Discount Apparel has offered to pay only $$75$ per jacket. However, because no sales commissions would be involved with this special order, D$.$ Lawrance will incur variable selling expenses of only $$8$ per unit on these sales, rather than the $$20$ it normally incurs. Accepting the order would cause no change in the company$$s fixed manufacturing costs or fixed operating costs. D$.$ Lawrance has enough plant capacity to produce $45,000$ jackets per year.

Required:

a$.$ Using incremental revenue and incremental costs, compute the expected effect of accepting this special order on D$.$ Lawrance's operating income.