Special$-$Order Decision, Alternatives, Relevant Costs

Redwood Elegance Company, manufactures wooden coffee tables for sale to specialty furniture stores. Currently, the company is operating at $85$ percent of capacity. A chain of furniture outlet

stores has offered to buy $26,000$ units of Redwood's ornate rustic tables as long as the table can be customized with the outlet chain's logo$.$ While the normal selling price is $$5\mathrm{.}00$ per table, the

chain has offered just $$2\mathrm{.}80$ per table. Redwood can accommodate the special order without affecting current sales. Unit cost information is as follows:

Fixed overhead is $$398,000$ per year and will not be affected by the special order. Normally, there is a commission of $10$ percent of price; this will not be paid on the special order since the outlet

chain is dealing directly with the company. The special order will require additional fixed costs of $$13,700$ for the design and setup of the machinery to engrave the outlet chain's logo on each table.

Required:

Which alternative is more cost effective and by how much?

Accept the special order $$

The operating income would increase by $