Larkin Company produces golf discs which it normally sells to retailers for $6

Larkin Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 25000 golf
discs is:

Materials

$ 10000

Labor

30000

Variable overhead

20000

Fixed overhead

40000

Total

$100000

Innova also incurs 5% sales commission ($0.30) on each disc sold.

Rudd Corporation offers Larkin $4.25 per disc for 5000 discs. Rudd would sell the discs under its own brand name in foreign
markets not yet served by Larkin. If Larkin accepts the offer its fixed overhead will increase from $40000 to $45000 due to the purchase of
a new imprinting machine. No sales commission will result from the special order.

Instructions

(a)

Prepare an incremental analysis for the special order.

(b)

Should Larkin accept the special order? Why or why not?