Reference no: EM133024823

Question - Franco, Inc., produces dental office examination chairs. Franco has the capacity to produce 5,000 chairs per year and currently is producing 4,000. Each chair retails for $2,800, and the costs to produce a single chair consist of direct materials of $750, direct labor of $600, and variable overhead of $300. Fixed overhead costs of $1,350,000 are met by selling the first 3,000 chairs. Franco has received a special order from Ghanem, Inc., to buy 800 chairs for $1,800. Should Franco accept the special order? How would Franco's decision change if the factory was already producing at capacity at the time of the special offer?