Because of high sales for July, E-readers, Inc., a producer of digital books, plans to produce and sell 20,000 books for $100 each, using all available capacity. Managers at E-readers, Inc., anticipate costs for the books for July as follows:

On June 30, E-readers, Inc., received a contract offer from Communication Devices to buy 10,000 books from E-readers, Inc., for delivery by July 31. In place of the typical sales price of $100 per book, the Communication Devices offer would reimburse E-readers, Inc.'s share of both variable and fixed manufacturing costs (that is, $70 per unit) plus pay a fixed fee of $25,000 to E-readers, Inc. Variable marketing costs would be zero for this order. Neither total manufacturing nor total marketing fixed costs would be affected by this order. E-readers, Inc., would lose 10,000 units of sales to regular customers in July, but this order would not affect sales to regular customers in any subsequent months.
Prepare a differential analysis comparing the status quo for July with the alternative case in which E-readers, Inc., accepts the special order. Write a brief report to E-readers, Inc.'s management explaining why the company should or should not accept the special order.

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Unit Manufacturing Costs Variable Direct Materials Cost Variable Labor Variable Overhead. Fixed Overhead $40 .20 (-$400,000 in total for July) Total Manufacturing Costs per Unit.... $70 Unit Marketing and Administrative Costs Variable Fixed. S 2 (-$280,000 for July) Total Marketing and Administrative Costs per Unit. Total Unit Costs Selling Price per Unit 16 S 86