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Determine should company a accept the special order

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Reference no: EM132547220

Say Company A has capacity to produce 100,000 units of product X. The cost estimate per unit based on current capacity of 80% is as follows:

                                        $ Per unit

Direct material                    $2.00

Direct labor                       $5.00

Variable production overhead   $3.00

Fixed production overhead    $4.00

Total                               $14.00

The company sells the product X to its regular customer at $20.00. However, a non- regular customer has approached the company to purchase the excess capacity at $18 each.

Required

Question 1: Should Company A accept this special order?

Reference no: EM132547220

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