Reference no: EM132526388

Molly Mae Clothing designs, manufactures, and sells dresses for special occasions. Molly Mae's best selling dress is a strapless gown typically purchased for weddings that sells for $895. The company's accounting system identifies the cost for each dress as $630, not including any custom fitting or design changes. These costs are comprised of $220 in direct materials, $310 in direct labor, and $100 in allocated manufacturing overhead.

A customer has requested a large special order of these dresses and has requested a discount on the bulk purchase. The details of the special order are below:

1. The customer would like to purchase 15 dresses at a discounted price of $750 each.
2. The customer would like a few small customizations that would require a special embroidery machine for $1,550. This customization would not increase the variable cost of the dresses. The special machine would have no other use once the special order has been completed.
3. The manufacturing costs of $100 includes $65 in fixed overhead and $35 in variable (per unit) overhead.
4. The order would have no effect on the company's ability to produce and sell dresses to other customers.
5. The order could be fulfilled using the company's existing manufacturing capacity.

Required:

Question 1: What is the financial advantage or disadvantage of accepting the special order from this customer? (Hint, first determine what is relevant and not relevant)