Answer:
Increase in net income $4,750.00
Step-by-step explanation:
In order to carry out an incremental analysis, only relevant cash flows should be considered.
The relevant cash flows from accepting the special order are the variable costs and the sales revenue. Please, note that the fixed costs are not relevant for this decision. Simply because they would be incurred either way.
The relevant variable costs include:
$
sales revenue (28.50× 5,000) = 142500
Variable cost (3.35 + 8.65 + 7.75+ 4.80) ( 122,750)
Cost of special machine ( 15,000)
Increase in net operating income 4,750