Using Differential Analysis: Bounce Company makes basketballs. Data from the forecasted income statement for the year before any special orders are as follows:

Fixed costs included in the above forecasted income statement are $1,200,000 in manufacturing costs and $100,000 in marketing costs. These costs would not be affected by the order. A special order offering to buy 50,000 basketballs for $7.50 each was made to Bounce. Bounce has enough idle capacity to process this order.

Required: What impact would acceptance of the special order have on operating profit?

Amount Per Unit Sales revenue Manufacturing costs $4,000,000 $10.00 3,200,000 8.00 Gross profit 800,000 2.00 Marketing costs 300,000 .75 Operating profit $ 500,000 $ 1.25