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Should the company accept this special order

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Question - Wati Corporation has received a request for a special order of 6,000 units of product K19 for RM32.30 each. The normal selling price of this product is RM33.45 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows:

Direct materials RM15.00

Direct labor 3.80

Variable manufacturing overhead 1.40

Fixed manufacturing overhead 2.10

Unit product cost RM22.30

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by RM4.90 per unit and that would require a one-time investment of RM23,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

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

Reference no: EM133088532

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