Special order. (J. Watson) Butler Ltd. manufactures one product in its Waterloo factory.

Currently, Butler has capacity for 80,000 units per month and normally produces 50,000 units per month. The regular selling price for its product is $9.00.

Recently, Butler has been approached to provide a special order to a customer outside its normal distribution channels. The customer has requested a 40% price reduction on an order for 10,000 units.

The accountant for Butler has provided the following information regarding the average cost per unit at different production volumes:

REQUIRED 1. Assuming the company is producing at the normal volume of 50,000 units per month, should it accept the special order at the 40% discounted price? What is the minimum price Butler would be willing to accept?
2. Assume the company is producing at a monthly volume of 55,000 units per month. What is the minimum price per unit it should charge the customer for this special order?
3. Assume the company is producing at a monthly volume of 73,000 units. Should the special ‘ order be accepted? Assume the order must be filled in full (all 10,000 units). Fully support your answer.LO1

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Monthly Unit Production 50,000 units 60,000 units 70,000 units 80,000 units Average Cost per Unit $8.50 $7.75 $7.375 $6.953 If the company exceeds 64,000 units per month, it must hire additional factory supervision and cleanup staff, increasing the monthly fixed costs by $11,250.