QUESTION FIVE (11 marks) The Vector Company makes a single product called a Clog. The company has the capacity to produce 40,000 Clogs per year. Per-unit costs to produce and sell one Clog at that activity level follow: Direct Materials $20 Direct Labour $10 Variable Manufacturing Overhead $ 5 Fixed Manufacturing Overhead $ 7 Variable Selling Expense $ 8 Fixed Selling Expense $ 2 The regular selling price for one Clog is $60. A special order has been received at Vector from the Fairview Company to purchase 8,000 Clogs next year at 20% off the regular selling price. If this special order is accepted, the variable selling expense will be reduced by 25% However, Vector would have to purchase a specialized machine to engrave the Fairview name on each Clog in the special order. This machine would cost $12,000, and Vector would have no use for it after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labour is a variable cost. a. If Vector can expect to sell 32,000 Clogs next year through regular channels and the special order is accepted at 20% off the regular selling price, what would be the effect on operating income next year due to accepting this order? (5 marks) b) Given the same conditions as part a), what is the lowest selling price that Vector can accept for one Clog before rejecting this special order? (2 marks) b. If Vector has an opportunity to sell 37,960 Clogs next year through regular channels and the special order is accepted for 20% off the regular selling price, what would be the effect on operating income next year due to accepting this order? (4 marks)