Reference no: EM13607182

For the following scenarios, use the cost information pertaining to the current production process. The Special Order
Jessica Massey, a friend of Smith's and an owner of a small company in nearby Tacoma, WA, had just called to see if TPE could accommodate a special printing order next month. She needed 20,000 brochures, concerning a new product, to distribute at three trade shows she was planning to attend. When Smith quoted Massey the usual price of $18 per 100 brochures ($0.18/brochure), she sighed, "Ross, I know that TPE does a high quality job, but I'm short on funds right now because I have spent so much on getting this new product up and running. I can't go any higher than $10 per 100 brochures ($0.10/brochure) on this job. If you can't do it for that, I'll have to go to someone else. I'm sure the brochures won't look as nice, but that's all I've got to spend."

Smith knew he did not have the capacity at the moment to handle the special order. He had a maximum capacity of 160,000 and was operating at 150,000 currently, so he couldn't accommodate an additional 20,000 brochures. And $10 per 100 brochures sounded low. He replied, "Let me look into this. I'm not sure we can do it for $10, but I'll be glad to think about it. I'll give you a call back in a couple of days." Smith realized that with this order he would not have to pay his sales representative the typical sales commission of $1 per 100 brochures ($0.01/brochure), but that $1 per 100 savings would not begin to make up for the lower price.Should Smith accept the special order? Provide both financial and non-financial considerations.