Problem
Reddy Corporation manufactures coolers. The company can manufacture 600,000 coolers a year at a variable cost of $1,500,000 and a fixed cost of $900,000. Based on management's predictions for next year, 480,000 coolers will be sold at the regular price of $10.00 each. In addition, a special order was placed for 120,000 coolers to be sold at a 40% discount off the regular price. Total fixed costs would be unaffected by this order. By what amount would the company's net operating income be increased as a result of the special order?