Special order pricing Gorman Manufacturing Company Electric Motor Division man- ufactures compressor motors for the compressor division. The motors are transferred to the compressor division at $155 per unit, which includes direct cost of $90 per unit, indirect manufac- turing cost of $35, and a markup to cover administrative costs of $320,000, of which 10 percent is variable. Normal production is 8,000 units per year.

The company has been approached by a manufacturer of electric powered lawn mowers who offers to pay $143 per unit for a special order of 1,000 motors. The order would require a one-time investment of $8,000 for leasing extra space and equipment to complete the order.

Transcribed Image Text:

REQUIRED a. Decide if the order should be accepted and support your decision with calculations. b. If the special order also requires $7.50 per unit for shipping the motors, should the order be accepted?