Question 5 Differential Analysis (TOTAL: 20 marks) Part A A customer has asked Nike Inc. to supply 6,000 units of its new Marathon Shoe, with some modifications, for $31.30 each. The normal selling price of this product is $46.50 each. The normal unit product cost is computed as follows: Direct materials $16.40 Direct labour 8.30 Variable manufacturing overhead 4.40 Fixed manufacturing overhead 1.90 Unit product cost $31.00 Direct labour is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to the product that would increase the variable costs by $8.90 per unit, and that would require a one-time investment of $20,000 in special moulds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Determine the effect on the company's total net operating income of accepting the special order. Also, explain whether the company should accept or reject the special order. Show calculations. (8 marks)