Exercise $23-13($Algo$)$ Special offer pricing LO P$7$

Farrow Company reports the following annual results.

Contribution Margin Income Statement Per Unit Annual Total

Sales $(480,000$ units$)$ $ $15\mathrm{.}00$ $ $7,200,000$

Variable costs

Direct materials $2\mathrm{.}00960,000$

Direct labor $4\mathrm{.}001,920,000$

Overhead $2\mathrm{.}501,200,000$

Contribution margin $6\mathrm{.}503,120,000$

Fixed costs

Fixed overhead $2\mathrm{.}00960,000$

Fixed general and administrative $1\mathrm{.}50720,000$

Income $ $3\mathrm{.}00$ $ $1,440,000$

The company receives a special offer for $48,000$ units at $$13$ per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $$192,000$ and incremental fixed general and administrative costs of $$206,000.$

$($a$)$ Compute the income or loss for the special offer.

$($b$)$ Should the company accept or reject the special offer?