Student Exam

4. (TCO 5)The following information relates to a product produced by Bayfield Company:

Direct materials	$70
Direct labor	40
Variable overhead	45
Fixed overhead	50
Unit cost	$205

Fixed selling costs are $1,000,000 per year. Although production capacity is 900,000 units per year, Bayfield expects to produce only 800,000 units next year. The product normally sells for $170 each. A customer has offered to buy 60,000 units for $160 each. Compute the effect on the net income if Bayfield accepts the special order.