Vallerani Corporation has received a customer request for a…
Vallerani Corporation has received a customer request for a special order of 5,600 units of product V90 for $27.80 each. Product V90’s unit product cost is $27.40, determined as follows: Direct materials $ 3.00 Direct labor 8.30 Variable manufacturing overhead 7.40 Fixed manufacturing overhead 8.70 Unit product cost $ 27.40 The special order would have no effect on the company’s total fixed manufacturing overhead costs. The customer would like modifications made to product V90 that would increase the variable costs by $4.10 per unit and that would require an investment of $20,000 in special molds that would have no salvage value or other use. This special order would have no effect on the company’s other sales. The company has ample spare capacity to produce the special order. The increase (decrease) to operating income as a result of accepting this special order is about: