Lack Cat Corporation manufactures a product with the following full unit costs at a volume of 4,000 units:
| Direct materials |
$200 |
| Direct labor |
80 |
| Manufacturing overhead (30% variable) |
150 |
| Selling expenses (50% variable) |
50 |
| Administrative expenses (10% variable) |
80 |
| Total per unit |
$560 |
A company recently approached Black Cat's management with an offer to purchase 450 units for $550 each. Black Cat currently sells the product to dealers for $800 each. Black Cat's capacity is sufficient to produce the extra 450 units. No selling expenses would be incurred on the special order. If Black Cat's management accepts the offer, profits will:
Decrease by $120,000
Increase by $66,800
Increase by $97,650
Decrease by $24,000