Should the company accept the special order and why

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Reference no: EM132536544

Albertine Co. manufactures and sells trophies for winners of athletic and other events.

Its manufacturing plant has the capacity to produce 16,000 trophies each month; current monthly production is 12,800 trophies. The company normally charges $113 per trophy.

Cost data for the current level of production are shown below:

Variable costs:

Direct materials .......................... $614,400

Direct labor ................................. $256,000

Selling and administrative .......... $35,840

Fixed costs:

Manufacturing ............................ $294,400

Selling and administrative .......... $94,720

The company has just received a special one-time order for 1,200 trophies at $61 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Existing customers would have no knowledge about this order.

Required:

Question 1: Should the company accept this special order? Why?

Reference no: EM132536544

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