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Should the company accept this special order

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Problem - Palmer Company manufactures and sells trophies for winners of athletic events. The company normally charges $60 per trophy. The average costs for a trophy is shown below.

Direct materials                                   $22

Direct labor                                         12

Variable manufacturing overhead          8

Variable marketing expenses                4

Fixed manufacturing overhead              16 ($2,000,000 fixed manufacturing overhead/125,000 trophies)

Total costs                                          $62

Palmer Company has enough idle capacity to accept a one-time only special order for 10,000 trophies at $50 per trophy. Palmer Company will not incur any variable marketing expenses for this order and no additional fixed costs.

Required - Should the company accept this special order? Please state your decision and provide numerical support for your decision.

Reference no: EM131773733

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