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Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product units per year. A customer has offered to buy an additional 4,000

Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product units per year. A customer has offered to buy an additional 4,000 units at $25 each and sell them outside the country so as not to compete with Termus. The following data are available: Costs at 85% Capacity. Per Unit. Total Direct materials $10.00 $425,000 Direct labor 8.00 340,000 Overhead (fixed and variable) 13.00 552.500 Totals $31.00 $1,317,500 In producing 4,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $4 per unit would be incurred. What is the effect on income if Termus accepts this order? Income will decrease by $6 per unit. Income will increase by $6 per unit. Income will increase by $7 per unit. Income will decrease by $3 per unit. Income will increase by $3 per unit.

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