Kansas Company Uses Activity-Based Costing A Total of 500 Setups at a Cost of $120

Multiple Choice

Kansas Company uses activity-based costing.The company produces and sells 20,000 units at $22 per unit.Kansas Company's product cost is calculated as follows:
$$\begin{array} { l l } \text { Variable costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 2 \text { per unit } \\\text { Setup costs } & \$ 3 \text { per unit } \\\text { Total costs } & \$ 15 \text { per unit }\end{array}$$
A total of 500 setups at a cost of $120 per setup are required to produce the 20,000 units.Kansas Company has received a special order to sell 5,000 units at $12 per unit.Kansas Company has excess capacity available,but these 5,000 units would require 60 setups.If Kansas Company accepts the special order,what is the increase or decrease in net income?

A) $0
B) decrease $5,000
C) decrease $15,000
D) increase $2,800