U Balance Corporation manufactures balance bikes for toddlers. The company currently sells the bikes for $60.00. A customer has approached the company and would like to make a special order for 1,000 bikes. Due to the large order, the client would like a discount and offered to pay $45.00 per bike. U Balance is trying to determine if they should accept the special order. UBalance currently sells 20,000 bikes per year and has the ability to produce 25,000 bikes. UBalance has provided information on its normal costs to produce the bikes as follows: Per Unit Direct Materials $15 Direct Labour $10 Manufacturing Overhead $8 Unit product cost $33.

The variable portion of the manufacturing overhead is $5 per unit. The order would have no effect on the company's total fixed manufacturing overhead costs and would not affect regular sales.

Required: a. Calculate the incremental operating income if the company accepts the special order. b. Should the company accept the special order?

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