Ralph is considering whether to respond to a customer's appeal for production of a special product. The offered price is 6, 000 and Ralph estimates incremental direct labor will cost 300 and incremental direct material will cost 200. Ralph uses a single overhead pool with LLA given by OV = 150, 000 + 2 · DL$, where DL$ denotes direct labor dollars. Normal, full costing is used, with a normal volume of 10, 000 direct labor dollars.
(a) Determine the unit cost of this special product.
(b) What is the net change in Ralph's cost of goods sold as a result of this product being produced and sold. Explain.