Wharton Company has the capacity to produce 50,000 units per year. The company sells each unit for $125. Budgeted information is as follows:

Revenues $5,612,000

Direct materials $1,932,000 Direct labor 552,000 Manufacturing overhead (fixed) 276,000

Manufacturing overhead (variable) 552,000 3,312,000

Total $2,300,000

A special order has been received for 5,000 units to be sold for $80 per unit. The company would incur an additional $60,000 in total fixed costs in order to lease a special machine in order to make a slight modification to the original product. Should the company accept the special order?

No, accepting this order would decrease profits to $2,263,600.

No, total costs would increase by $303,600.

Yes, the revenue will increase substantially.

Yes, profit will increase by $36,400.