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The Spartan Company has an annual plant capacity of 25,000 units. Predicted data on sales and costs are given below.
Sales (20,000 units @ $50)
$1,000,000
Manufacturing costs:
Variable (materials, labor, and overhead)
$40 per unit
Fixed overhead
$30,000
Selling and administrative expenses:
Variable (sales commission-$1 per unit)
$2 per unit
Fixed
$7,000
A special order has been received from outside for 4,000 units at a selling price of $45 each.
This order will have no effect on regular sales. The usual sales commission on this order will be reduced by one-half. Should the company accept the order? Show supporting computations.
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