Special order, activity-based costing. (CMA, adapted) The Award Plus Company manufac¬

tures medals for winners of athletic events and other contests. Its manufacturing plant has the _capacity to produce 10,000 medals each month; current production and sales are 7,500 medals per month. The company normally charges $165 per medal. Cost information for the current activity level is as follows:

Variable costs that vary with units produced:

Direct materials Direct manufacturing labour Variable costs (for setups, materials-handling, quality control, and so on) that vary with number of batches, 150 batches X $550 per batch Fixed manufacturing costs Fixed marketing costs Total costs

$ 288,750 330,000 82,500 302.500 192.500

$1,196,250 Award Plus has just received a special one-time-only order for 2,500 medals at $110 per medal. Accepting the special order would not affect the company’s regular business. Award Plus makes medals for its existing customers in batch sizes of 50 medals (150 batches X 50 medals per batch = 7,500 medals). The special order requires Award Plus to make the medals in 25 batches of 100 each.
Required 1. Should Award Plus accept this special order? Why? Explain briefly.
2. Suppose plant capacity was only 9,000 medals instead of 10,000 medals each month. The special order must either be taken in full or rejected totally. Should Award Plus accept the special order? <>'
3. As in requirement 1, assume that monthly capacity is 10,000 medals. Award Plus is con¬
cerned that ifit accepts the special order, its existing customers will immediately demand a price discount of $11 in the month in which the special order is being fdled. They would argue that Award Plus’s capacity costs are now being spread over more units and that exist-
^—-ring customers should get the benefit of these lower costs. Should Award Plus accept the special order under these conditions? Show all calculations.