Reference no: EM132418507

Problem: Piteo Corporation has received a request for a special order of 9,500 units of product N19 for $47.00 each. The normal selling price of this product is $52.10 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product N19 is computed as follows:

Direct materials $17.80

Direct labor  7.10

Variable manufacturing overhead  4.30

Fixed manufacturing overhead  7.20

Unit product cost $36.40

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product N19 that would increase the variable costs by $6.70 per unit and that would require a one-time investment of $46,500 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:

Question: What is the net operating income of accepting the special order?