Reference no: EM132562100

The Award Plus Company (APC) manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each per month. Current production and sales are 7,500 medals per month. The company normally charges $ 150 per medal.

Cost information for the current activity level is as follows:

Variable cost:

Direct materials $ 262,500

Direct labor 300,000

Variable cost ( Set ups, material handling, quality control, etc.

That vary with the number of bathes, 150 bathes * 500 per batch) 75,000

Fixed manufacturing costs 275,000

Fixed marketing costs 175,000

Total costs 1,087,500

The Award Plus Company has just received a one time only special order for 2500 medals at $ 100 per medal. Accepting the special order would not affect the company's regular business. Award Plus Company makes medals for its existing customers in batch sizes of 50 medals. The special order requires Award Plus to make the medals in 25 bathes of 100 each.

Required:

Question 1. Should APC accept this special order? Show your calculations

Question 2. Suppose plant capacity were only 9000 medals instead of 10,000 medals each month. The order should either taken in full or rejected completely. Should APC accept the special order?