Problem

The following information relates to a product produced by Bayfield Company:

Direct materials 50
Direct labor 35
Variable overhead 30
Fixed overhead 40
Unit cost 155

Fixed selling costs are $1,000,000 per year. Although production capacity is 900,000 units per year, Bayfield expects to produce only 800,000 units next year. The product normally sells for $180 each. A customer has offered to buy 55,000 units for $140 each. Compute the effect on the net income if Bayfield accepts the special order.