Reference no: EM133020244

Question - Marigold Company is a leading manufacturer of sunglasses. One of Marigold's products protects the eyes from ultraviolet rays. An upscale sporting goods store has contacted Marigold about purchasing 28,900 pairs of these sunglasses. Marigold's unit manufacturing cost, based on a full capacity of 244,000 units, is as follows:

Direct materials $6

Direct labor 4

Manufacturing overhead (75% fixed) 27

Total manufacturing costs $37

Marigold also incurs selling and administrative expenses of $74,400 plus $2 per pair for sales commissions. The company has plenty of excess manufacturing capacity to use in manufacturing the sunglasses. Marigold's normal price for these sunglasses is $40 per pair. The sporting goods store has offered to pay $32 per pair. Since the special order was initiated by the sporting goods store, no sales commission will be paid.

Required - What would be the effect on Marigold's income if the special order were accepted?