I need assistance with the question below.

Farrow Co. expects to sell 400,000 units of its product in the next period with the following results.

  Sales (400,000 units)

$

6,000,000

  Costs and expenses

      Direct materials

800,000

      Direct labor

1,600,000

      Overhead

400,000

      Selling expenses

600,000

      Administrative expenses

1,028,000

  Total costs and expenses

4,428,000

  Net income

$

1,572,000

The company has an opportunity to sell 40,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $172,000.

Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit.

Normal Volume

Additional Volume

Combined Total

Cost & Expense

Total Cost & Expense

0

0

0

Incremental income (loss) from new business

Should the company accept or reject the offer?