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The Bharu Violin company has the capacity to manufacture and sell 5,000 violins each year but is currently only manufacturing and selling 4,800. The following

The Bharu Violin company has the capacity to manufacture and sell 5,000 violins each year but is currently only manufacturing and selling 4,800. The following per unit numbers relate to annual operations at 4800 units.

Per violin

Selling price $600

Manufacturing cost

Variable price $130

Fixed $270

Selling and admin cost

Variable $20

Fixed $40

Woolgar Symphony Orchestra is interested in purchasing Bharus excess capacity of 200 units but only if they can get the violins for $350 each. This special order would not affect regular sales or the cost structure above.

If the special order from Woolgar Symphony Orchestra is accepted, what would happen to Bharu's profit? Will it decrease or increase by how much?

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