Should special order should be accepted in full or rejected

Reference no: EM132082330

Question: Tyson Ltd produces pens and its machines are capable of producing 40 pens per hour. Unit cost of producing the pens is $1.50, and they sell their pens for $8.50 per pen. Damon Company has asked Tyson to produce 10,000 pens for $6.50. Tyson Ltd estimates that unit costs for the pen will be $2.00, and machines will only be able to produce 10 pens per hour. Tyson Ltd has a total of 4,000 machine hours of capacity. To complete the special order, Tyson Ltd will have to purchase an additional machine that will cost $7,000.

Current demand for Tyson Ltd's pens is 230,000 units - should the special order should be accepted in full or rejected?

Reference no: EM132082330

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