Tough Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular as an undergarment for sports activities. Operating at capacity, the company can produce 1,000,000 undergarments of Y-Go a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows.

The U.S. Army has approached Tough Fiber and expressed an interest in purchasing 200,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Tough Fiber is operating at 70 percent capacity and does not have any other potential buyers for Y-Go. If Tough Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.

Instructions
Using incremental analysis, determine whether Tough Fiber should accept the Army'soffer.

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Direct materials Direct labor Variable manufacturing o Fixed manufacturing overhead Variable selling expenses Per Undergarment $2.00 0.50 1.00 1.50 0.25 $5.25 Total $2,000,000 500,000 1,000,000 1,500,000 250,000 $5,250,000 Totals