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What effect would accepting this order

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Question - Bat Ltd. is considering a special order for 10 handcrafted Batarang to be given as gifts to Superman from a customer. The normal selling price of a Batarang is $389.95 and its unit product cost is $264.00 as shown below:

Direct Material $143

Direct Labour $86

Manufacturing Overhead $35

Unit Product Cost $264

Most of the manufacturing overhead is fixed and unaffected by variations in how much Batarang is produced in any given period. However, $7 of the overhead is variable with respect to the number of Batarang produced. The customer who is interested in the special order would like special filigree applied to the Batarang. This filigree would require additional materials costing $6 per Batarang and would also require acquisition of a special tool costing $465 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order.

Required - What effect would accepting this order have on the company's net operating income if a special price of $349.95 is offered per Batarang for this order? Should the special order be accepted at this price?

Reference no: EM132633647

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