Maestro Music Ltd manufactures hand-held game players at a per-unit cost of the following.

The company sells each player for \($240\) and is presently operating at 80% of its capacity of 200 000 units per year. The company has received a special order at a price of \($199\) per unit from an e-retailer for 1000 units per month for 1 year only. The units sold to the e-retailer would have a different cover from the company’s regular players that would add an extra \($5\) per unit to direct materials. Maestro Ltd would have to purchase a new machine for \($120\) 000 to produce the new covers. The machine will have no alternative use or residual value at the end of the year. The sales by the e-retailer would have no impact on the company’s regular sales, because of the different cover and markets involved.
Required

(a) Should the company accept the special order? Explain.

(b) What would be the impact on profits of accepting the order.

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Direct labour Direct materials Variable factory overhead Fixed factory overhead Total unit cost $ 6 18 36 30 $90