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Miles Audio produces and sells car audio systems. They specialize in receivers and currently offer two models. The Growler is a high quality but affordable unit that the company produces for sale in auto parts and electronics stores. The Maniac is sold almost solely to individuals and high-end car stereo installers. The Maniac is only produced to order. In other words, the Maniac is not kept in inventory and is only produced when a customer orders one. Based on estimates of next quarter's business, the financial staff at Miles has produces the following forecasted income statement.

	Growler	Maniac	Total
Number of systems	2,400	450	2,850
Sales revenue	$ 768,000	$ 472,500	$ 1,240,500
Materials	$ 148,800	$ 75,150	$ 223,950
Labor	194,400	182,250	376,650
Materials inspection	89,280	45,090	134,370
Factory lease	33,270	17,970	51,240
Utilities	14,810	8,030	22,840
Miscellaneous factory costs	27,540	14,940	42,480
Sales and administration			142,250
Total costs			$ 993,780
Operating profit			$ 246,720

Firm orders have already been placed with Miles for the 450 Maniac systems reflected in the forecasted quarterly income statement. Materials inspection varies with material cost. The labor wage rate at Miles (excluding variable overhead) is $54 per hour. The factory lease, utilities, and miscellaneous factory costs are allocated to the product lines based on the amount of floor space occupied. Sales and administration costs are not allocated to the two product lines.

Lanoo Custom Systems, a custom car audio shop, has called Miles and asked about placing an order for the upcoming quarter for 100 units of the Maniac. Miles Audio is already scheduled to work at capacity in the next quarter and would have to give up some other business to fulfill this order. Miles is committed to the orders for the Maniac it already has accepted but can reduce the number of Growler systems produced in the next quarter to 1,900. Miles would not be able to make up the losses from the reduced Growler sales as the market is quite competitive and customers for this relatively standard system will buy another product. Miles also is expecting to be operating at close to full capacity for the foreseeable future, which is another reason the lost Growler systems could not be replaced later. The customer is willing to pay a premium price of $1,360 for the special order. The factory lease, utilities, miscellaneous factory costs, and sales and administration would not be affected by the special order.

Required:

a-1. Calculate the differential operating profit (loss).

a-2. From an operating profit (loss) perspective for March, should Miles Audio accept the order from Lanoo Custom Systems?

b. What is the minimum price Miles Audio should accept to take the special order from Lanoo Custom Systems?

From an operating profit (loss) perspective for March, should Miles Audio accept the order from Lanoo Custom Systems? What is the minimum price Miles Audio should accept to take the special order from Lanoo Custom Systems? Calculate the differential operating profit (loss). (Select option "increase" or "decrease", keeping Without special order as the base. Select "none" if there is no effect.)

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