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Question - Slippy Corporation, the worldwide leader in slipper manufacture, manufactures slippers and sells them for 9$ a pair. Variable manufacturing cost is 5$ a pair (this includes labor, raw materials and variable overhead) and fixed manufacturing cost is $150,000. Slippy has enough idle capacity available to accept a onetime special order of 20,000 pairs of slippers at $7 a pair. Slippy will not incur any additional marketing or other fixed costs as part of this special order.
1. Should Slippy Corp take the order? Why or why not?
2. What is the impact on operating income if they were to take this order?
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