Waterways mass-produces a special connector unit that it normally sells for $3.90. It sells approximately 37,400 of these units eachyear. The unit variable costs are $2.40. A company in Canada that has been unable to produce enough of a similar connector to meetcustomer demand would like to buy 15,800 of these units at $2.70 per unit. The production of these'units is near full capacity atWaterways, so to accept the offer from the Canadian company would require temporarily adding another shift to its production line.To do this would increase unit variable manufacturing costs by $0.30. However, unit variable selling costs would be reduced by $0.20.An irrigation company has asked for a special order of 2,100 of the connectors. To meet this special order, Waterways would not needan additional shift and variable selling costs would not be reduced. The irrigation company is willing to pay $3.20 per unit.(a)Your answer is correct.What are the consequences of Waterways agreeing to provide the 15,800 units to the Canadian company? Would this be a wise"special order to accept?Waterways shouldaccept the special order because net incomeincreasesby $3160 (b)Should Waterways accept the special order from the irrigation company?Waterwaysaccept the special order because net income -by $

SPECIAL ORDER ANALYSISUntil Information is Provided, There shall be no additional Fixed Manufacturing Cost & Selling & Administrative Cost Included in Manufacturing of Special Order..In Special Order, We have to Calculate incremental Revenue & Increamental Net Income generated from Special Order..If Special Order Generates Incremental Net Income then we accept such special Order otherwise we reject it.Only Relevant Costs Related to Manufacturing Of Special Order shall be Considered as Expenses. I) Variable Cost Per Unit := Variable Cost Per Unit + Increase in Variable Manufacturing Cost - Decrease in Variable Selling Cost = $2.40 + $0.30 - $0.20= $2.50II) Increase or Decrease in Net Income :Selling Price Per Unit $2.70Less :— Variable Cost Per Unit $2.50Incremental Contribution Margin Per Unit $0.20 Incremental Contribution Margin ($0.20 * 15,800)$3,160Less :— Fixed Cost -Increase in Net Operating Income $3,160I) Increase or Decrease in Net Income :Selling Price Per Unit $3.20Less :— Variable Cost Per Unit $2.40Incremental Contribution Margin Per Unit $0.80Incremental Contribution Margin ($0.80 * 2,100)$1,680Less :— Fixed Cost -Increase in Net Operating Income $1,680REQUIREMENT # :— FINAL ANSWERRequirement #1 :— Waterways Should Accept the special order because net income increases by $3,160Requirement #2 :— Waterways Should Accept the special order because net income increases by $1,680