Reference no: EM133018698

Question - Wang Company manufactures circuit boards. The company has a manufacturing capacity of 40,000 circuit boards per month with total fixed manufacturing costs of $180,000. At present, the company is selling 32,000 circuit boards per month through regular channels at a selling price of $12.00 each. The following cost information per unit is available:

Variable manufacturing cost $6.10

Variable selling expense 1.20

Fixed manufacturing cost 2.50

Total Cost $9.80

The company has just obtained a request for a one-time special order of 7,000 circuit boards at a price of $8.75 per Board. If the special order is accepted, Wang must add a specialized component to the circuit board which will increase the direct material cost by $1.25. Wang will not incur any selling expense on the special order but the boards must be shipped to Vietnam at a cost to Wang of $3,500. In addition, the special order requires a one-time set-up of the manufacturing facility. The set-up would cost Wang $4,500.

Required - Should Wang accept the special order?