Asked by Maria Clara on Jul 09, 2024
Verified
A company is currently operating at 70% capacity producing 8,000 units.Cost information relating to this current production is shown in the following table:
The company has been approached by a customer with a request for a special order for 1,500 units.The sales price per unit for this special order is $10.Should the company accept the special order?
Special Order
A unique, one-time order or request from a customer, often requiring customized production or handling outside of regular operations.
Capacity
Capacity refers to the maximum amount of work or output a system is capable of achieving in a given period under normal conditions.
Sales Price
The amount of money charged for a product or service; the price for which something is sold.
- Understand the decision-making process regarding special orders and pricing strategies.
Verified Answer
The company should not accept this special order.Incremental costs exceed incremental income.
$3.20 + $7.10 + $0.05 = $10.35 incremental costs
Learning Objectives
- Understand the decision-making process regarding special orders and pricing strategies.
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