Wehrs Corporation has received a request for a special order of 9,500 units of product K19 for $47.00 each. The normal selling price of this product is $52.10 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows:

Direct materials	$	17.80
Direct labor		7.10
Variable manufacturing overhead		4.30
Fixed manufacturing overhead		7.20
Unit product cost	$	36.40

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $6.70 per unit and that would require a one-time investment of $46,500 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:

Determine the effect on the company's total net operating income of accepting the special order.

Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows:

Annual sales		2,500	units
Selling price per unit	$	304
Variable costs per unit:
Production	$	125
Selling	$	49
Avoidable fixed costs per year:
Production	$	50,000
Selling	$	75,000
Allocated common fixed corporate costs per year	$	55,000

If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product.

If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be:

Multiple Choice

• $325,000

• $135,000

• $145,000

• $200,000