Magnacom Inc

Essay

Magnacom Inc. produces a product, with a normal selling price of $35.00 per unit. The variable costs are $22.00 per unit. Fixed costs are $40,000 for a normal production run of 10,000 units per month. The company has received a request for a special order that would not interfere with normal sales. The order is for 3,500 units and a special price of $24.00 per unit. Magnacom Inc. has the capacity to handle the special order and, for this order, a variable selling cost of $2.00 per unit would be eliminated. If the special order is accepted, what will the effect be on Magnacom Inc.'s income?