Johnson Company manufactures ties. When 28,000 ties are produced, the costs per unit are:
Direct materials $0.60
Direct manufacturing labor $3.00
Variable manufacturing overhead $1.20
Fixed manufacturing overhead $1.60
Variable selling $0.80
Fixed selling $1.13
The ties normally sell for $22 each. The company has received a special order for 2,000 ties at $8.00 per tie. The company will incur an additional variable selling cost of $1.50 per unit with the special order. The company has excess capacity.
Required:
Compute the amount by which the operating income would change if the order were accepted.