Hooper Insecticide Company is currently producing and selling 30 000 kilograms of Sta Ded monthly. This volume is 70% of capacity for Sta Ded. A wholesaler outside the company's marketing area offers to buy 5 000 kilograms of this product per month on a two-year contract at $1.80 per kilogram, provided the present pinkish color can be changed to green. The product will be marketed under the wholesaler's brand name.
To change the color, the company must purchase a mixing machine at a cost of $3,000. The machine will have no value at the end of the two-year contract period. Ingredients to change the color in the finished product will cost $.01 per kilogram of product. Marketing expense will not be increased if the new business is accepted, but additional administrative expense of $150 per month is estimated. No additional cost for supervision or property tax is contemplated. Additional payroll taxes will be $210.
A monthly income statement for the current operations is as follows:

Required:
Prepare a differential cost analysis to show whether the company should accept the proposed new business.

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Sales Cost to manufacture: $72,000 $18,000 15,000 Direct labor. Factory overhead: Supervisory labor.... Power ($180 flixed) Supplies Maintenance and repair Depreciation. Insurance (all variable) Property tax... Payroll taxeS 6,000 4,000 780 600 810 3,000 210 125 1.250 Cost of goods produced and soldmna 49 775 $22,225 Goss proftcoo $11,000 Marketing expense. Administrative expense... Income before income tax.. 4,50015,500