Pardo Company produces a single product and has capacity to produce 120,000 units per month. Costs to produce its current monthly sales of 80,000 units follow. The normal selling price of the product is $100 per unit. A new customer offers to purchase 20,000 units for $75 per unit. If the special offer is accepted, there will be no additional fixed overhead and no additional fixed general and administrative costs. The special offer would not affect its normal sales.
(a) Compute the income from the special offer.
(b) Should the company accept the special offer?
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