Waterway is the creator of Y-Go, a technology that weaves silver into fabrics to kill bacteria and odour on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments each year. The per-unit and total costs for the undergarment are as follows: Per Undergarment Total Direct materials $1.75 $1,750,000 Direct labour 0.50 500,000 Variable manufacturing overhead 1.35 1,350,000 Fixed manufacturing overhead 1.45 1,450,000 Variable selling expenses 0.25 250,000 Total $5.30 $5,300,000 The Canadian Armed Forces (CAF) has approached Waterway and expressed an interest in purchasing 212,000 Y-Go undergarments for soldiers stationed in extremely warm climates. The CAF would pay the unit cost for direct materials, direct labour, and variable manufacturing overhead costs. In addition, the CAF has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Waterway is operating at 80% capacity and does not have any other potential buyers for Y-Go. If Waterway accepts the CAF's offer, it will not incur any variable selling expenses for this order. (a) Using incremental analysis, determine whether Waterway should accept the CAF's offer. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to O decimal places, e.g. 5,275.) Incremental revenue Incremental cost: Variable cost Incremental income $ Waterway should the Canadian forces' offer