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Should the company accept this special order

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Question - Alexander Co. manufactures and sells special ribbons for winners of athletic and other events. Its manufacturing plant has the capacity to produce 11,000 trophies each month; current monthly production is 8,800 ribbons. The company normally charges $87 per ribbon. Cost data for the current level of production are shown below

Variable costs:

Direct materials $299,200

Direct labor $202,400

Selling and Administrative $21,120

Fixed costs:

Manufacturing $179,520

Selling and administrative $58,960

The company has just received a special one-time order for 500 ribbons at $50 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required - Should the company accept this special order? Why?

Reference no: EM132834262

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