MAX produces and sells power adapters. Its contribution margin income statement follows.
A potential customer offers to buy 10,000 units for $5.80 each. These sales would not affect the company’s sales through its normal channels. Details of the special offer follow.
∙ Variable costs per unit would not change.
∙ Accepting the offer would require incremental fixed overhead costs of $2,200.
∙ Accepting the offer would require incremental fixed general and administrative costs of $1,800.
Required
1. Compute income from the special offer.
2. Should the company accept or reject the special offer?
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