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Juett Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 70,000 units per month is as follows:

Direct materials $29.60

Direct labor $5.80

Variable Manf Ovh $2.50

Fixed Manf Ovh $17.20

Variable SG&A $1.80

Fixed SG&A $6.70

The normal selling price of the product is $72.90 per unit.

An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.10 less per unit on this order than on normal sales.Direct labor is a variable cost in this company.

Q1. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $66.10 per unit. By how much would this special order increase (decrease) the company's net operating income for the month?

Q2. Suppose the company is already operating at capacity when the special order is received from the overseas customer. In this case, for each unit delivered to the overseas customer, the company would forgo the contribution margin earned on a regular sale (i.e., this is the opportunity cost of each unit delivered to the overseas customer). What is the contribution margin earned on a regular sale?

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